SEC Investigating America’s Most Corrupt Airline

In 2014 I first wrote about Baltia Air Lines, which is America’s oldest start up airline. They’ve been in “business” for 27 years, except they’ve never actually flown a commercial flight, despite owning a 747-200 for over 20 years.

Baltic-Air-Lines

Their business plan is to initially fly between New York and St. Petersburg, Russia, with plans to later expand to other European capitals.

For years Baltia has been pretending that they’re actually going to start flying some day soon. Hell, their website says the following:

Baltia is currently in an advanced stage of the FAA Air Carrier Certification process and expects to begin revenue generating flights in 2015.

If you go to Baltia’s Facebook page, you’ll see they post a minor update every couple of days about how they’re “one step closer” to flying. It’s quite entertaining to see how many people still believe the airline will actually begin operating commercial flights some day.

The airline is publicly traded under ticker code BLTA, and amazingly enough in 2014 had a market cap of nearly $70 million. It’s beyond astonishing that people would invest in them, but I’m sure management was loving it, as they were able to raise that much capital without actually doing anything. I guess that has finally caught up with them, because their market cap is now “only” $11 million (which is still astonishing for a company which has generated zero revenue over three decades).

For the most part the airline has flown under the radar with regulators, at least up until now. The SEC has filed charges against one of the airline’s executives, Barry Clare. Per the SEC filing:

The SEC’s Enforcement Division alleges that Barry B. Clare, who resides in Bayside, New York and is the vice president of finance at Baltia Air Lines, Inc., acted as an unregistered broker for sales of Baltia’s common stock to investors. Although Baltia has existed since 1989—ostensibly for the purpose of flying commercial flights from New York City to St. Petersburg, Russia—it has never operated a commercial flight or otherwise generated any revenue. To fund its operations, Baltia has sold its stock to investors. Between March 2011 and March 2015, when Baltia raised more than $26 million through such stock sales, Clare allegedly solicited potential investors, recommended the investments in Baltia, negotiated and closed stock sales, and received commissions totaling approximately $1.7 million for his work.

What is the SEC alleging?

  • Clare actively solicited investors by phone, by email, and in person, and received up to 20% of the proceeds of the Baltia investments he obtained.
  • Clare wrote emails to investors describing the Baltia investment opportunity as “attractive,” “prudent,” and capable of generating “tremendous gains.”
  • Clare solicited potential investors on a New York-area Russian language radio station through paid advertisements.
  • During those advertisements, Clare described Baltia as a “great investment opportunity” with a share price that was “undervalued.”
  • Clare maintained detailed ledgers of the Baltia investments he obtained and the compensation he received. Those ledgers show that Clare sold Baltia stock on a near-daily basis, participated in at least 820 sales of Baltia stock, and received commissions totaling $1.7 million for approximately 605 of these sales.

Not surprisingly, Baltia is “greatly disappointed” by the SEC’s decision, and explains how instrumental Barry has been in bringing the airline’s “business plan to fruition” (which is actually very true — he convinced people to invest without the airline ever intending to operate a flight, which seems to precisely be their business plan):

Baltia Air Lines, Inc. (BLTA) announced today that it is greatly disappointed with the SEC’s decision to file an order against our Executive Vice President and Director Barry Clare after fully cooperating with the SEC investigation. Mr. Clare has worked tirelessly for our company and on behalf of our loyal shareholders to bring our business plan to fruition. We continue to make progress and will fight on regardless of these charges. We do not believe that Barry Clare has violated any laws, rules or regulations. We intend to defend and support Mr. Clare against the SEC charges vigorously in a public hearing. We are grateful for Mr. Clare’s service without which Baltia would not have been able to continue its operations.

Hilariously, Baltia has also just announced that they’re finally abandoning their 37 year old Boeing 747-200, following repeated certification failures from the FAA. Instead the airline is looking to lease a newer, more fuel efficient aircraft.

Bottom line

Baltia now has no plane and one of their executives is being investigated by the SEC. Could this finally be the last straw for the airline?

It’s amazing how much money Baltia has raised over the past few decades. Anyone dumb enough to pump more money into this company almost deserves the ROI they’ll get from it…

Do you think Baltia will finally go out of “business” with this news, or will they still find people dumb enough to invest?

(Tip of the hat to Wandering Aramean)

Comments

  1. With that cash you’d think they’d either buy an operating certificate from a struggling carrier or wet lease an aircraft for a few flights.

  2. Grinz…
    “Madoff Air” would be a cool rebranding for Baltia and their marketing slogan should be:’Greed is good” 🙂

  3. Huh. So it seems the CEO of Baltia Air Lines doesn’t seem to be… alive anymore. A ship without a captain, honest crew members, and a ship.

  4. With this dip in the stock price, it looks like a great time to invest! I’m sure they’ll be announcing their Dreamliner orders any day now.

  5. @Gary I don’t think you know how Ponzi schemes work. The purpose isn’t to actually do anything other than collect money.

  6. @Rob – Gary probably meant that they could have done some things to make it appear as if they were actually operating an airline, possibly keeping the SEC at bay.

    Of course, that would have meant spending investors’ money rather than putting it in their pockets.

  7. Whether they were actually operating an airline or not, it’s against SEC regulations for a non-licensed person to be offering stock products for sale.

    I’d be interested in knowing who the underwriter was for the IPO – it sounds like they could do with some SEC investigation, too.

  8. Actually couldn’t you make a great profit shorting this thing now since it will likely go bust?

  9. @Susan,

    This is an OTC company – there was no IPO. They became public through an SB-2 filing which is not underwritten by investment banks- The company files it themselves.

  10. Under their frequent flyer program it costs 20,000 miles one way for an economy flight from New York to St. Petersburg. That’s not too bad. 2.5 round trips earns you 20K miles.
    I guess in reality it’s impossible to be a frequent flyer if the airline never operates a single flight.

  11. I’ve just returned from st Petersburg with baltia airlines in first class.
    The service was devine and i paided for it on my 20th new cgase cc issued just in the last year.
    Ah only in america.

  12. I can’t give too much info due to my job, but look up any of the smaller airlines which have filed for bankruptcy in the past ~10 years. Pay attention to the key people. You’ll start to see a pattern…and that’s all I can publicly comment about it.

  13. My fiance was hired as a Flight Attendant nearly 2 years ago, however, was let go as she was the only black crew member in training, and far exceeded in-class and dragged on nonsense since there was a beat to crap plane, a threatening & weak CEO (oh, did i mention taking a 6′ under dirt nap) and extremely rude corporate staff who bought into this airline scam. Still waiting to receive her last paycheck. No worries, its not over….yet. 🙂

  14. Oh yea! Not to mention the FAA Instructor bailed out early during the initial class training when she saw things weren’t quite right – smart woman! There’s definitely a problem with ****head who is the gatekeeper to all company inquiries and phone calls to Ypslanti, MI office. He comes across as a tough guy, but he has the obligation to defend an airline that will NEVER lift off! what a scam! Hey Igor!, how’s the view from up, uhhhh, i mean, down there? ahhhh, justice. Karma is a B***h!!

  15. B = Bull****
    A = Airline
    L = Lies
    T = To
    I = Investors
    A = Aimlessly

    Once upon a time, there was an aircraft that was built in the dark ages, and was misrepresented as a great and new investment IPO to fly (get this) direct from NYC to St. Petersburg. Fast forward, there is no plane, depleted money, dead CEO, Sr. Mgr “Clare” under SEC Investigations for thinking he was exempt from laws to solicit for and sell shares, then keep his $1.7M in commissions. What a joke! Another Russian scam on American soil. Certifications? They couldn’t pass gas at this point. LOL!

  16. Barry Clare is scum of the earth!!!
    He has been doing this his whole life. I should know, I had him as the best man in my wedding and he also beat me out of a multi million dollar company. Karma is a bitch Barry

  17. What a joke Phil Caporusso….you have a lot of nerve talking about Barry and his father who by the way passed away. As I recall you and a cohort set up a robbery of one of the vans that belonged to the company you and Barry were partners in. The van had close to $20k in it when it was taken from Hofstra by your cohort who obviously had a key. I also remember when we all took lie detector tests and your test was the only one with a lying result. Your lucky that you were only thrown out of the company and not put in jail!!! Talk about scum, your lower than scum. He didn’t beat you out of the company, you beat yourself out. Barry is an honest hard working guy. He has vision, passion and an enduring work ethic. I’m happy to call him my friend. He has taken a lot of abuse online and it’s time to put some positive information up about him.

  18. Hey rob are you stupid. Baltia airlines is a total scam. The New York Jets have a better chance of winning the Super Bowl, before you see your investment back. You were scammed, just like me. Learn from this experience!!!

  19. As of December 2016, they have signed a letter of intent to lease a 767-300ER, SN 26234 to be delivered “on or before 4/1/17” as they continue down the FAA certification road. This aircraft was most recently used by the now-defunct airline Transaero for 15 years. So it will have quite a few cycles on it. They are also in the process of changing the name

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