The Securities and Exchange Commission announced today that on October 18, 2012, the Honorable Sandra J. Feuerstein of the U.S. District Court for the Eastern District of New York entered a final judgment against two brothers, Mayer Amsel and David Amsel, following a bench trial in a market manipulation case involving the securities of a company known as East Delta Resources Corp.
The final judgment orders the Amsels to pay, on a joint and several basis, $936,780.46 in disgorgement and $326,631.17 in prejudgment interest. In addition, Mayer Amsel was ordered to pay a civil money penalty of $455,000, and David Amsel was ordered to pay a civil money penalty of $715,000.
Besides monetary remedies, the judgment also provides injunctive relief. The Amsels were permanently enjoined from violating Section 10(b) of the Securities Exchange Act of 1934; Exchange Act Rule 10b-5; and Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933. The judgment likewise permanently enjoins both men from participating in any offering of penny stock and any activities to induce the purchase or sale of any penny stock. David Amsel was permanently enjoined from aiding and abetting violations of Section 13(a) of the Exchange Act and Exchange Act Rules 12b-20, 13a-1, and 13a-13. David Amsel was also enjoined from serving as an officer or director of a publicly held company for eight years from September 7, 2012.
The SEC charged the Amsels in January 2010, alleging that together they garnered more than $1 million in illegal profits when they conducted unlawful wash sales and matched sales of unregistered East Delta shares. All of the SEC’s claims against the Amsels were resolved in the SEC’s favor via summary judgment, at trial, or through two post-trial rulings. All of the findings in the court’s summary judgment ruling and post-trial rulings were incorporated into the final judgment.
The court found on summary judgment that the Amsels violated Section 10(b) of the Exchange Act and Section 17(a) of the Securities Act when they executed fraudulent wash sales and matched sales, and that David Amsel aided and abetted East Delta’s violation of Section 13(a) of the Exchange Act when he prepared certain SEC filings for East Delta. Based upon the evidence presented at trial, the court found that both Amsels also violated Sections 5(a) and 5(c) of the Securities Act by selling unregistered East Delta shares, notwithstanding the existence of a Form S-8 registration statement and consulting agreement associated with Mayer Amsel’s stock. Significantly, the court found the Form S-8 ineffective for registration purposes because the "primary character" of Mayer Amsel’s consulting role at East Delta was capital-raising and promotional and thus contrary to the eligibility requirements for effective Form S-8 registration.
The SEC’s case was litigated by Frederick Block, Assistant Chief Litigation Counsel and Danette Edwards, Senior Counsel. The investigation prior to the litigation was led by Stephen Herm, David Neuman, Senior Investigations Counsel, and Gregory Faragasso, Assistant Director.
The SEC appreciates the assistance of the Quebec Autorité des marchés financiers (AMF) and the British Columbia Securities Commission (BCSC) in connection with the investigation leading to the litigation.
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