SEC CHARGES UNLAWFUL PUBLIC OFFERING?

The following is an excerpt from the SEC web site and defines what the SEC calls an “unlawful public offering”:

Litigation Release No. 21967 / May 13, 2011
Securities and Exchange Commission v. Advanced Optics Electronics, Inc., Leslie S. Robins, JDC Swan, Inc. and Jason Claffey, Civil Action No. 11-cv-1321 (S.D.N.Y. February 25, 2011)
SEC Brings Civil Action Against Advanced Optics Electronics, Inc., its Former Chairman Leslie S. Robins, and Stock Seller Jason Claffey For Engaging in an Unlawful Public Offering
Related Administrative and Cease-and-Desist Proceedings Brought against Broker-Dealer Divine Capital Markets, LLC, its CEO Danielle Hughes and associated person Michael Buonomo.
In an action brought in federal district court, the Securities and Exchange Commission on February 25, 2011, charged Advanced Optics Electronics, Inc. (ADOT), its former Chairman Leslie S. Robins, JDC Swan, Inc. and its former President, Jason Claffey with engaging in an unlawful public offering of the securities of ADOT, a development stage Nevada corporation located in New Mexico.
The Commission’s complaint, filed in the U.S. District Court for the Southern District of New York, alleges that from at least as early as January 2006, through June 2007, ADOT, acting through Robins, issued a total of over 9.8 billion shares of ADOT to JDC Swan through the use of purchase agreements that represented falsely that the shares were registered and free trading. The complaint further alleges that Claffey arranged to have the ADOT shares sold through a securities account he established at Divine Capital Markets, LLC, a registered broker-dealer located in New York. According to the SEC’s complaint, the defendants raised over $2 million through the offer and sales of ADOT shares into public market without a registration statement on file, or declared effective by the SEC. The complaint alleges that Claffey acquired the shares with a view to distribution and that there was no applicable exemption from registration to the offers and sales.
According to the SEC’s complaint, Claffey retained approximately 30% of the proceeds of the ADOT sales and wired the remainder to an ADOT account controlled by Robins. The complaint further alleges that ADOT, Robins, JDC Swan and Claffey’s offers and sales of ADOT shares violated Sections 5(a) and (c) of the Securities Act.
The SEC’s complaint against ADOT, Robins, JDC Swan and Claffey seeks a final judgment permanently enjoining the defendants from future violations of the Sections 5(a) and (c) and ordering them to pay civil money penalties, disgorge their ill gotten gains, plus prejudgment interest, and prohibiting them from participating in an offering of penny stock pursuant to Section 20(g) of the Securities Act
The Commission also instituted related cease-and-desist and administrative proceedings against registered broker-dealer Divine Capital Markets, LLC (Divine Capital), its CEO and President Danielle Hughes, and Divine Capital employee, Michael Buonomo. In the Matter of Divine Capital Markets, Danielle Hughes and Michael Buonomo, Release No. 34-63980 (Feb. 25, 2011). In the contested proceedings, the Commission’s Division of Enforcement alleges that Divine and Buonomo each violated sections 5(a) and (c) of the Securities Act and that Hughes and Divine failed to supervise Buonomo with a view to preventing his violations. The Division seeks administrative sanctions, penalties and disgorgement against all three respondents.”