JUDGE ENTERS FINAL JUDGEMENT AGAINST TWO PENNY STOCK PROMOTERS

The following is an excerpt from the SEC website:

"The SEC announced today that on June 24, 2011, the Honorable Judge Richard A. Lazzara, United States District Judge for the Middle District of Florida, entered final judgments against two penny stock promoters, Robert M. Esposito and Gregory A. King, ordering them to pay $19,515,598 and $943,166, respectively, in disgorgement and civil penalties, in a fraudulent touting case the Commission filed on March 17, 2008. SEC v. Esposito, et al., No. 08 CV 494 T26 (M.D. Fla.). See Lit. Rel. No. 20499. The Court had previously entered judgments against Esposito and King permanently enjoining them from violating the anti-fraud and other provisions of the federal securities laws, and barring them from participating in any future penny stock offering. See Lit. Rel. No. 21449 (March 11, 2010).

In this action, the Commission charged that Esposito, King, and others participated in a fraudulent touting scheme of the stock of Anscott Industries, Inc. The complaint alleged that in April 2003, Esposito, a penny stock promoter, orchestrated a reverse merger between Anscott (then a private company) and Liquidix, Inc., a public shell company which, after the merger, changed its name to Anscott. According to the complaint, Esposito received 4 million shares of Anscott stock from the company as compensation for arranging the reverse merger and for future stock promotion work. The complaint further alleged that a fraudulent Form S-8 registration statement was filed with the Commission for the 4 million shares of Anscott issued to Esposito, which improperly enabled Esposito to sell these shares to the public during the fraudulent touting scheme.

As alleged in the complaint, after the reverse merger and the issuance of shares to Esposito, Esposito paid King, another penny stock promoter with whom Esposito had worked previously, to prepare and disseminate materially false and misleading tout sheets promoting Anscott stock. The Commission alleged that these tout sheets -- crafted to appear like independent investment newsletters and entitled the Wall Street Bulletin -- recommended Anscott as a "strong buy," and were disseminated to the public through fax spamming from late May 2003 through July 2003.

According to the complaint, these tout sheets, which King prepared, contained materially false and misleading representations about Anscott's products, business affiliations, and projected revenues. The complaint further alleged that these tout sheets failed to disclose, among other information, that Esposito, who was paid by the company to promote Anscott stock, was paying King to prepare and disseminate these "newsletters," and that Esposito was selling his Anscott stock during the touting scheme contrary to the Wall Street Bulletin's "strong buy" recommendation and price targets.

During the touting campaign, the price of Anscott's stock rose from around $1.40 a share in mid-May 2003, to a high of $4.59 a share on July 11, 2003. The complaint alleged that Esposito sold most of his Anscott stock to the public, realizing millions of dollars in illicit profits.

The Court's final judgment against Esposito orders him to pay disgorgement of $7,691,135, prejudgment interest of $4,133,326, and third tier civil penalty of $7,691,135. The judgment against Esposito also (a) permanently enjoins him from future violations of Sections 17(a), 5(a) and 5(c) of the Securities Act of 1933, Sections 10(b) and 13(d) of the Securities Exchange Act of 1934 and Exchange Act Rules 10b-5, 13d-1 and 13d-2; and (b) permanently bars him from participating in any future penny stock offerings.

The Court's final judgment against King orders him to pay disgorgement of $358,000, prejudgment interest of $227,166, and a third tier civil penalty of $358,000. The judgment against King also (a) permanently enjoins him from future violations of Sections 17(b) of the Securities Act, Section 10(b) of the Exchange Act and Exchange Act Rule 10b-5; and (b) permanently bars him from participating in any future penny stock offerings.

The Court previously entered final judgment against other defendants in this case, Anscott and its CEO, Jack R. Belluscio, on October 27, 2008: (1) permanently enjoining them from future violations of Sections 5(a) and 5(c) of the Securities Act, Section 10(b) of the Exchange Act and Exchange Act Rule 10b-5; (2) permanently barring Belluscio from acting as an officer or director of a public company; (3) ordering Belluscio to pay third tier civil penalties of $240,000; and (4) ordering Anscott to pay third tier civil penalties of $1,200,000. In a related administrative proceeding, on May 7, 2008, the Commission issued an Order revoking the registration of Anscott securities pursuant to Section 12(j) of the Exchange Act. See In the Matter of Anscott Industries, Inc., Release No. 34-57791."