SEC CHARGES THAT CEO ISSUED "FALSE AND MISLEADING PRESS RELEASES"

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION 

The Securities and Exchange Commission charged a San Francisco-based penny stock company CEO with defrauding investors by issuing false and misleading press releases portraying his purported marketing and infomercial company as a successful venture in order to drive the stock price up while he covertly sold millions of shares into the public market for more than $300,000 in illicit profits.

According to the SEC’s complaint filed against Joseph A. Noel in federal district court in San Francisco, the deceptive press releases about his company YesDTC Holdings touted exclusive distribution rights, licensing agreements, and certain products purportedly certified by the government.  Noel’s promotional campaigns based on such false information caused a spike in YesDTC’s thinly-traded stock and enabled him to dump millions of his own shares for a profit.  To conceal his sales, Noel sold the shares through a company he created in his teenage daughter’s name without disclosing as required that he was actually selling the shares.

The SEC also suspended trading in YesDTC stock today, and instituted an administrative proceeding to revoke its registration.

“Noel issued false press releases to pump up the price of the stock and set up a nominee company to dump the shares into the market to unwitting investors,” said Jina L. Choi, Director of the SEC’s San Francisco Regional Office.  “We’re always on the lookout for penny stock company CEOs who manipulate the market to line their own pockets.”    

The SEC’s complaint charges Noel with violating antifraud and registration provisions of the federal securities laws.  The SEC seeks disgorgement of ill-gotten gains plus prejudgment interest and a financial penalty as well as a permanent injunction.  The SEC also is seeking an officer-and-director bar and a penny stock bar against Noel.

The SEC’s investigation was conducted by Heather E. Marlow and David Berman of the San Francisco Regional Office, and the case is supervised by Tracy Davis.  The SEC’s litigation will be led by Aaron Arnzen and Ms. Marlow.  The SEC appreciates the assistance of the U.S. Attorney’s Office for the Northern District of California and the Federal Bureau of Investigation.

TWINS TO PAY TO SETTLE PUMP-AND-DUMP CHARGES

FROM: U.S. SECURITIES AND EXCHANGE COMMISSION
BRITISH TWIN BROTHERS AGREE TO PAY $175,000 TO SETTLE MICROCAP PUMP-AND-DUMP CHARGES

The Securities and Exchange Commission announced today that brothers Alexander John Hunter and Thomas Edward Hunter, both of Great Britain, have agreed to settle the Commission's pending civil action against them. The Commission's complaint, filed April 20, 2012 in the United States District Court for the Southern District of New York, alleges that the Hunters were just 16 years old when they began disseminating subscription-based e-mail newsletters through a pair of websites they created to tout stocks selected by a "stock picking robot," which they described as a highly sophisticated computer trading program that was the product of extensive research and development. Some investors paid an additional fee for the "home version" of the robot software.

The Commission’s complaint also alleges that the brothers separately created a third website where they marketed their newsletter subscriber list to penny stock promoters and boasted, "One email to this list of people rockets a stock price." The Hunters were in turn paid to send selected penny stock ticker symbols to their subscribers, who were misled to believe that the stock "picks" were the product of the robot. The Hunters sent out their newsletters near the beginning of the trading day, and the price and volume of the promoted stocks spiked dramatically as newsletter subscribers rushed to purchase shares. However, the stocks typically fell precipitously shortly thereafter, leaving investors in most cases with shares worth less than they had purchased them for earlier in the day.

According to the SEC’s complaint, the Hunters also offered subscribers a downloadable version of the stock picking robot for an additional fee of $97. Rather than performing the analysis advertised, the software was actually designed to deliver users a stock pick supplied by the brothers.

The Commission’s complaint alleges that by virtue of the conduct described above, the Defendants violated the antifraud provisions of the federal securities laws.

Under today's announced settlement, the Hunter brothers, without admitting or denying the allegations in the Commission’s complaint, consented to the entry of a judgment requiring Alex Hunter to pay a $100,000 penalty, requiring Tom Hunter to pay a $75,000 penalty, and enjoining both brothers individually from future violations of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder.

SEC CHARGES SEVERAL INDIVIDUALS IN INTERNATIONAL PUMP-AND-DUMP SCHEME

FROM: U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C., March 15, 2013 — The Securities and Exchange Commission today charged a group of Canadian stock promoters, two San Diego attorneys, a Bahamas-based broker-dealer, and other participants in an international "pump-and-dump" scheme involving two publicly traded U.S. companies, Pacific Blue Energy Corporation and Tradeshow Marketing Company Ltd.

According to the SEC’s complaint, Canadian stock promoters John Kirk, Benjamin Kirk, Dylan Boyle, James Hinton, and their associates, used false and misleading promotions to pump up trading in the stock of the two microcap companies and made millions when they secretly dumped their own shares. Microcap companies typically have limited assets and low-priced stock that trades in low volumes. The SEC alleges that the promoters sent investors false and misleading emails about the companies through two websites they controlled, Skymark Research and Emerging Stock Report, and used "boiler room" sales calls to tout the stocks, falsely claiming that the recommendations were based on independent research by Skymark and Emerging Stock Report.

The SEC alleges that San Diego-based attorneys Luis Carrillo and Wade Huettel were central participants in the scheme who helped the promoters conceal their ownership interests in the companies, drafted misleading public filings, and provided misleading legal opinions. As part of the scheme, their law firm, Carrillo Huettel LLP, secretly received proceeds of stock sales in the form of a sham "loan."

The SEC’s complaint, filed in federal court in Manhattan, alleges that Gibraltar Global Securities, a Bahamian broker-dealer, provided false affidavits and misleading statements that allowed Benjamin Kirk to secretly sell shares of the companies he was promoting. The SEC also charged Gibraltar’s president, Warren Davis, who signed misleading representations on behalf of Gibraltar.

"Microcap fraud is a scourge on our markets and we will continue to aggressively pursue individuals who engage in it, whether they are unscrupulous stock promoters who prey on investors or unethical attorneys who enable these pernicious schemes. Moreover, as this action demonstrates, the SEC is working closely with foreign authorities to root out this conduct in the international arena," said Andrew M. Calamari, Director of the SEC’s New York Regional Office.

According to the SEC, Tradeshow president Luniel de Beer, who served as chairman of Pacific Blue, received more than $330,000 in secret kickbacks for his part in the scheme. In addition, the SEC alleged that de Beer and Pacific Blue president Joel Franklin made misleading representations and facilitated the promoters’ stock sales. Without admitting or denying the SEC’s allegations, Franklin agreed to settle the SEC’s charges and consented to certain injunctive relief.

The SEC’s complaint charges Carrillo Huettel LLP, Carrillo, Huettel, Gibraltar Global Securities, John Kirk, Benjamin Kirk, Boyle, Hinton, de Beer, Franklin, Pacific Blue, and Tradeshow with violations of U.S. anti-fraud laws and rules, and charges these defendants, along with Warren Davis and Carrillo’s father, Dr. Luis Carrillo, with distributing unregistered shares, in violation of U.S. securities laws.

The SEC is seeking to have the defendants return their allegedly ill-gotten gains, with interest, and to bar Carrillo, Huettel, de Beer, John Kirk, Benjamin Kirk, Boyle, and Hinton from participating in penny stock offerings and from serving as public company officers or directors. The SEC is seeking civil monetary penalties from the attorneys, their law firm, and from de Beer.

Joshua Newville, Katherine Bromberg, Michael Paley, and Michael Osnato of the New York Regional Office conducted the SEC’s investigation. Mr. Newville, Ms. Bromberg and Todd Brody will lead the SEC’s litigation effort.

The SEC thanks the Financial Industry Regulatory Authority, the Alberta Securities Commission, the British Columbia Securities Commission, the Bahamas Securities Commission, the National Banking and Securities Commission of Mexico, and the Turks and Caicos Islands Financial Services Commission for their assistance in this matter

SEC BRINGS CHARGES AGAINST SEVERAL INDIVIDUALS ALLEGEDLY INVOLVED IN PUMP-AND-DUMP

The following excerpt is from the Securities and Exchange Commission website:

SEC Charges CEO of Las Vegas-Based Penny Stock Company and Several Consultants in Pump-and-Dump Scheme
“Washington, D.C., March 7, 2012 — The Securities and Exchange Commission today charged a Las Vegas-based food and beverage company and its CEO with conducting a fraudulent pump-and-dump scheme, and charged several consultants for their illegal sales of company shares into the markets.

The SEC alleges that Prime Star Group Inc. under the direction of CEO Roger Mohlman issued false and misleading press releases that touted lucrative agreements for the company’s food and beverage products. For example, Prime Star falsely claimed in a March 2010 press release that it had entered in a distribution agreement with another company in the beverage business valued at up to $16 million annually. Furthermore, certain Prime Star reports filed with the SEC understated the company’s net losses or overstated its cash balance.

The SEC suspended trading in Prime Star in June 2011 due to questions about the adequacy and accuracy of information about the company.
“Prime Star and Mohlman used backdated consulting agreements and forged attorney opinion letters as a means to issue millions of shares to the consultants who then dumped them on unsuspecting investors,” said Eric I. Bustillo, Director of the SEC’s Miami Regional Office. “The SEC will persist in its efforts to stamp out microcap fraud schemes.”

Since the beginning of fiscal year 2011, the SEC has filed more than 50 enforcement actions for misconduct related to penny stocks, and issued more than 65 orders suspending the trading of suspicious microcap issuers. Microcap stocks are issued by the smallest of companies and tend to be low priced and trade in low volumes. Many penny stock companies do not file financial reports with the SEC, so investing in them entails many risks. The SEC has published a microcap stock guide for investors and an Investor Alert about avoiding microcap fraud perpetrated through social media.
The SEC’s complaint against Prime Star and Mohlman alleges that they fraudulently issued free-trading Prime Star shares to consultants who also are charged in the scheme:
Kevin Carson of Lake Worth, Fla.

Danny Colon of Edgewater, N.J.

Colon’s company DC International Consulting LLC

Colon’s wife Marysol Morera of Edgewater, N.J.

Colon’s half brother Felix Rivera of Clifton, N.J.

Esper Gullatt, Jr. of Aurora, Colo.

Gullatt’s Minnesota-based company The Stone Financial Group Inc.

Joshua Konigsberg of Palm Beach Gardens, Fla.
The SEC alleges that Prime Star and Mohlman pumped the stock by exaggerating the company’s operations and contracts in a series of press releases issued in October 2009 and March 2010. For instance, they issued an October 14 press release claiming Prime Star’s subsidiary Wild Grill Foods had received purchase orders for more than $1.25 million of seafood products. Mohlman was quoted saying, “Prime Star Group is thrilled at the growth of this business unit. We will continue to grow the Wild Grill brand, its domestic distribution, and have begun exploring international opportunities for distribution abroad.” However, in reality, Prime Star’s just-established Wild Grill subsidiary had no operations and there were no purchase orders.

According to the SEC’s complaint, Prime Star’s press releases coincided with the illegal issuance of millions of unregistered shares of Prime Star stock to the purported business consultants from August 2009 to March 2010. Although Prime Star had a class of shares registered pursuant Section 12(g) of the Securities Exchange Act of 1934, that section does not permit transfers of those shares. To transfer Prime Star stock in compliance with the securities laws, Mohlman, Prime Star and the consultants had to either register an offering of the company’s shares or meet an exemption to the offering registration requirement. However, they did neither.

The SEC alleges that Mohlman and Prime Star’s fraudulent promotional activities caused Prime Star’s stock price and trading volume to increase markedly. For instance, on March 16, a prior day press release caused trading volume to spike to more than 16 million shares, which was 10 times more than the previous day’s trading volume. Prime Star’s stock price plummeted the following day.

The SEC’s complaint filed in federal court in Nevada alleges Prime Star and Mohlman violated Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act and Rule 10b-5 thereunder. The complaint also alleges that Prime Star violated Sections 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act and Rules 12b-20, 13a-1 and 13a-13 thereunder. The complaint further alleges that Mohlman violated Section 13(b)(5) of the Exchange Act and Rules 13a-14, 13b2-1 and 13b2-2 thereunder and aided and abetted Prime Star’s violations of Sections 10(b), 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act and Rules 10b-5, 12b-20, 13a-1 and 13a-13 thereunder. The SEC also alleges Section 5(a) and 5(c) violations against Colon, Morera, Rivera, DC International Consulting, Carson, Gullatt, The Stone Financial Group, and Konigsberg.

One of the consultants — Konigsberg — has agreed to settle the SEC’s charges without admitting or denying the allegations by consenting to the entry of a judgment that would enjoin him from future violations of Sections 5(a) and 5(c) of the Securities Act. The SEC is seeking penalties and disgorgement plus prejudgment interest against the other consultants and Mohlman as well as an officer and director bar against Mohlman, penny stock bars against Mohlman, Colon, Morera, Rivera, Carson, and Gullatt, and permanent injunctions against all defendants. Separately, the Commission instituted administrative proceedings to determine whether the registration of each class of Prime Star securities should be revoked or suspended based on its failure to file required periodic reports.

The SEC’s investigation was conducted by Julie Russo, Elisha Frank, and Karaz Zaki of the Miami Regional Office, and Edward McCutcheon is leading the SEC’s litigation.”

SEC ACUSES PRIME STAR GROUP INC. OF DISTRIBUTING 14 MILLION SHARES OF BACKDATED STOCK

 The following excerpt is from the Securities and Exchange Commission website:

Securities and Exchange Commission v. Prime Star Group, Inc., et al., Civil Action No. 2:12-cv-00371 (D. Nev.) (March 7, 2012)

The Securities and Exchange Commission filed a civil action in the United States District Court for the District of Nevada against Prime Star Group, Inc. and its chief executive officer Roger Mohlman of Las Vegas, Nevada, for violations of antifraud, registration, reporting, and books and records provisions, and against Danny Colon and Marysol Morera of Edgewater, New Jersey, Felix Rivera of Clifton, New Jersey, New Jersey limited liability company DC International Consulting LLC, Kevin Carson of Lake Worth, Florida, Esper Gullatt, Jr. of Aurora, Colorado, Minnesota corporation The Stone Financial Group, Inc., and Joshua Konigsberg of Palm Beach Gardens, Florida for registration violations.

According to the SEC’s complaint, Prime Star illegally distributed more than 18 million purportedly unrestricted Rule 144 shares pursuant to backdated consulting agreements or forged attorney opinion letters. The SEC alleges that in furtherance of a pump and dump scheme, Prime Star and Mohlman issued the shares to consultants Colon, Morera, Rivera, DC International Consulting LLC, Carson, The Stone Financial Group, Inc., and Konigsberg who liquidated Prime Star stock and either kept a portion of the sales proceeds or forwarded proceeds to promoters to tout Prime Star. The SEC’s complaint also alleges that Prime Star and Mohlman made false and misleading statements in Prime Star’s SEC filings and in various press releases during the relevant time period.

The SEC alleges that Prime Star and Mohlman violated Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and that Prime Star violated Sections 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act and Rules 12b-20, 13a-1 and 13a-13 thereunder. The complaint further alleges that Mohlman violated Section 13(b)(5) of the Exchange Act and Rules 13a-14, 13b2-1 and 13b2-2 thereunder and aided and abetted Prime Star’s violations of Sections 10(b), 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act and Rules 10b-5(b), 12b-20, 13a-1 and 13a-13 thereunder. The SEC also alleges Section 5(a) and 5(c) violations against Colon, Morera, Rivera, DC International Consulting LLC, Carson, Gullatt, The Stone Financial Group, Inc., and Konigsberg.

Without admitting or denying the allegations in the Commission’s complaint, and subject to court approval, Konigsberg has consented to the entry of a judgment that would enjoin him from future violations of Sections 5(a) and 5(c) of the Securities Act.

Separately, the Commission today issued an Order Instituting Administrative Proceedings and Notice of Hearing Pursuant to Section 12(j) of the Securities Exchange Act of 1934 against Prime Star, to determine whether the registration of each class of its securities should be revoked or suspended for a period not exceeding twelve months based on its failure to file required periodic reports. The Division of Enforcement alleges that Prime Star has failed to comply with Exchange Act Section 13(a) and Rules 13a-1 and 13a-13 thereunder by failing to file periodic reports required by these provisions. A hearing will be scheduled before an Administrative Law Judge to determine whether the allegations of the Division contained in the Order are true, and to provide Prime Star an opportunity to respond to these allegations."

13 CHARGED BY SEC IN ALLEGED PUMP AND DUMP STOCK PROGRAM

The following excerpt is from the SEC website:

“The Securities and Exchange Commission announced charges today against Daniel “Rudy” Ruettiger and twelve other individuals who participated in a pump-and-dump scheme involving the stock of Rudy Nutrition, a now defunct Nevada corporation. The SEC's complaint, filed in the United States District Court for the District of Nevada, alleges that Rudy Ruettiger, who is known for having inspired the motion picture “Rudy,” founded Rudy Nutrition to compete with Gatorade in the sports drink market. The SEC alleges that while Rudy Nutrition produced and sold modest amounts of a sports drink called “Rudy,” with the tagline “Dream Big! Never Quit!,” the company primarily served as a vehicle for a pump-and-dump scheme in 2008. As alleged in the complaint, participants in this scheme made false and misleading statements in company press releases, SEC filings, and promotional materials, and engaged in manipulative trading to artificially inflate the price of Rudy Nutrition stock, while selling unregistered shares to investors. The complaint alleges that the scheme generated more than $11 million in illicit profits.

The SEC’s complaint names thirteen defendants and includes the following allegations:
Daniel “Rudy” Ruettiger, a resident of Las Vegas, Nevada, was the CEO of Rudy Nutrition. Ruettiger made false statements in SEC filings and authorized the issuance of company shares to nominee accounts used by other defendants to sell unregistered stock in the scheme.

Rocco “Rocky” Brandonisio, a resident of Las Vegas, Nevada, was the President of Rudy Nutrition. Brandonisio made false statements in an SEC filing and authorized the issuance of company shares to nominee accounts used by other defendants to sell unregistered stock in the scheme.
Stephen DeCesare, a resident of Las Vegas, Nevada, is a stock promoter. DeCesare was the primary organizer of the scheme. He recruited other defendants to manipulate the price of Rudy Nutrition stock, and directed the issuance of false company press releases.

Pawel P. Dynkowski, a citizen of Poland, is a stock promoter. Dynkowski manipulated the price of Rudy Nutrition stock using wash sales, matched orders, and other trading coordinated with the issuance of false company press releases.
Kevin S. Kaplan, a resident of Las Vegas, Nevada, was the Chief Financial Officer of Rudy Nutrition. Kaplan authorized the issuance of company shares to nominee accounts used by other defendants to sell unregistered stock in the scheme.

Gregg R. Mulholland, a resident of Huntington Beach, California, is a stock promoter. As part of the scheme, Mulholland made false statements about the company in mailers sent to two million domestic households, and controlled nominee accounts that sold shares in the scheme.
Mehmet Mustafoglu, a resident of Beverly Hills, California, was a consultant to Rudy Nutrition. Mustafoglu sold unregistered shares of Rudy Nutrition during the scheme.

Joseph A. Padilla, a resident of San Marcos, California, is a stock promoter and a former registered representative at the broker-dealer Scottsdale Capital Advisors LLC. Padilla sold unregistered shares of Rudy Nutrition during the scheme.

Angelo R. Panetta, a resident of Montebello, California, is a stock promoter. Panetta made false statements about Rudy Nutrition on an Internet radio show and in an Internet chat room, and sold unregistered shares of the company during the scheme.

Kevin J. Quinn, a resident of Santa Monica, California, is a business consultant and a disbarred attorney. Quinn arranged for the company to issue unregistered shares to nominee accounts used to sell shares during the scheme.

Andrea M. Ritchie, a resident of San Marcos, California, is a former registered representative at the broker-dealer Scottsdale Capital Advisors LLC. Ritchie sold shares of Rudy Nutrition for other defendants without conducting a reasonable inquiry as to the registration status of the shares.
Chad P. Smanjak, a citizen of the Republic of South Africa, is a stock promoter. Smanjak directed Dynkowski’s manipulative trading, and controlled a series of Panamanian companies that sold shares during the scheme.
Gary J. Yocom, a resident of Altamonte Springs, Florida, is a former registered representative at Thomas Anthony & Associates, Inc., a now defunct broker-dealer. Yocom sold shares of Rudy Nutrition for other defendants without conducting a reasonable inquiry as to the registration status of the shares.

As a result of the conduct described in the complaint, the Commission alleges that Ruettiger, Brandonisio, DeCesare, Dynkowski, Kaplan, Panetta, Quinn, and Smanjak violated Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933 (“Securities Act”), Section 10(b) of the Securities Exchange Act of 1934 (“Exchange Act”), and Rule 10b-5; that Mulholland violated Sections 5(a), 5(c), 17(a), and 17(b) of the Securities Act, Section 10(b) of the Exchange Act, and Rule 10b-5; and that Padilla, Ritchie, Mustafoglu and Yocom violated Sections 5(a) and 5(c) of the Securities Act. The Commission’s complaint seeks against each defendant permanent injunctive relief, disgorgement of ill-gotten gains with prejudgment interest, and civil penalties, and, as to certain defendants, orders barring them from participating in penny stock offerings and/or serving as officers and directors of public companies.

Without admitting or denying the allegations in the complaint, nine of the defendants – Ruettiger, Brandonisio, DeCesare, Kaplan, Mustafoglu, Padilla, Panetta, Quinn, and Yocom – have agreed to final judgments, which are subject to Court approval:
Ruettiger has consented to a final judgment that orders disgorgement of $185,750, prejudgment interest of $11,366, and a civil penalty of $185,750, bars him from participating in the future offering of any penny stock, bars him from acting as an officer or director of a public company, and permanently enjoins him from violating Sections 5(a), 5(c), and 17(a) of the Securities Act, Section 10(b) of the Exchange Act, and Rule 10b-5;

Brandonisio has consented to a final judgment that orders a civil penalty of $50,000, bars him from participating in the future offering of any penny stock, bars him from acting as an officer or director of a public company, and permanently enjoins him from violating Sections 5(a), 5(c), and 17(a) of the Securities Act, Section 10(b) of the Exchange Act, and Rule 10b-5.

DeCesare has consented to a final judgment that orders disgorgement of $1,341,366 and prejudgment interest of $108,744, bars him participating in the future offering of any penny stock, and permanently enjoins him from violating Sections 5(a), 5(c), and 17(a) of the Securities Act, Section 10(b) of the Exchange Act, and Rule 10b-5.

Kaplan has consented to a final judgment that orders a civil penalty of $25,000, bars him from participating in the future offering of any penny stock, bars him from acting as an officer or director of a public company for a period of five years, and permanently enjoins him from violating Sections 5(a), 5(c), and 17(a) of the Securities Act, Section 10(b) of the Exchange Act, and Rule 10b-5.

Mustafoglu has consented to a final judgment that orders disgorgement of $363,603, prejudgment interest of $31,765, and a civil penalty of $40,000, bars him from participating in the future offering of any penny stock, and permanently enjoins him from violating Sections 5(a) and 5(c) of the Securities Act.

Padilla has consented to a final judgment that orders disgorgement of $197,427, prejudgment interest of $18,128, and a civil penalty of $100,000, bars him from participating in the offering of any penny stock for a period of three years, and permanently enjoins him from violating Sections 5(a) and 5(c) of the Securities Act. Additionally, in related administrative proceedings, Padilla has consented to a Commission Order barring him from association with any broker or dealer, investment adviser, municipal securities dealer, municipal advisor, transfer agent, or nationally recognized statistical rating organization for a period of three years.

Panetta has consented to a final judgment that orders disgorgement of $175,000 and prejudgment interest of $21,692, bars him participating in the future offering of any penny stock, and permanently enjoins him from violating Sections 5(a), 5(c), and 17(a) of the Securities Act, Section 10(b) of the Exchange Act, and Rule 10b-5.

Quinn has consented to a final judgment that orders disgorgement of $197,286 and prejudgment interest of $17,755, and permanently enjoins him from violating Sections 5(a), 5(c), and 17(a) of the Securities Act, Section 10(b) of the Exchange Act, and Rule 10b-5.

Yocom has consented to a final judgment that orders disgorgement of $166,250 and prejudgment interest of $20,608, bars him from participating in the offering of any penny stock for a period of three years, and permanently enjoins him from violating Sections 5(a) and 5(c) of the Securities Act. Additionally, in related administrative proceedings, Yocom has consented to a Commission Order barring him from association with any broker or dealer, investment adviser, municipal securities dealer, municipal advisor, transfer agent, or nationally recognized statistical rating organization for a period of three years.
In addition, two defendants – Mulholland and Ritchie – have agreed to bifurcated judgments which are subject to Court approval:
Mulholland has consented to a judgment that bars him from participating in the future offering of any penny stock, permanently enjoins him from violating Sections 5(a), 5(c), 17(a), and 17(b) of the Securities Act, Section 10(b) of the Exchange Act, and Rule 10b-5, and provides that upon subsequent motion the Court will determine issues relating to monetary relief.

Ritchie has consented to a judgment that bars her from participating in the offering of any penny stock for a period of three years, permanently enjoins her from violating Sections 5(a) and 5(c) of the Securities Act, and provides that upon subsequent motion the Court will determine issues relating to monetary relief. In related administrative proceedings, Ritchie has also consented to a Commission Order barring her from association with any broker or dealer, investment adviser, municipal securities dealer, municipal advisor, transfer agent, or nationally recognized statistical rating organization for a period of three years.
The SEC thanks the following agencies for their cooperation and assistance in connection with this matter: the U.S. Attorney’s Office for the Central District of California; the U.S. Attorney’s Office for the District of Delaware; United States Immigration and Customs Enforcement, Department of Homeland Security, Homeland Security Investigations; and the Department of the Treasury, Internal Revenue Service, Criminal Investigation.”

MAN AND HIS COMPANIES SCHEME TO PUMP-AND-DUMP HIT A BUMP

The following excerpt is from the SEC website: October 18, 2011 “The Securities and Exchange Commission announced today that on October 14, 2011, the U.S. District Court for the Northern District of Texas entered a judgment against Jason Wynn, of Plano, Texas, and two companies under his control – Wynn Holdings LLC and Wynn Industries LLC. The Commission’s amended complaint alleged that Wynn and his companies violated the antifraud and registration provisions of the federal securities laws through a scheme to pump and dump the stock of four issuers: Beverage Creations, Inc., My Vintage Baby, Inc., ConnectAJet.com, Inc. and Alchemy Creative, Inc. The Commission alleged that Jason Wynn and his companies (1) purchased tens of millions of shares directly from the issuers for pennies per share, (2) touted the stock to investors through a nationwide marketing campaign, and (3) immediately dumped their shares into the public market at grossly inflated prices when no registration statement was filed or in effect. Wynn created artificial demand for the stocks through various ad campaigns, emails and misleading promotional mailers. While the promotional mailers disclosed that the Wynn companies received the stock being touted, they did not disclose that Wynn and his companies intended to sell that stock into the artificially inflated market created by the promotions. The judgment permanently enjoins Wynn, Wynn Holdings, LLC and Wynn Industries, LLC from violating Section 5 of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The judgment also bars Wynn and his companies from participating in any penny stock offerings and provides that they will be ordered to pay disgorgement and civil penalties determined by the district court at a later date. Wynn and his companies consented to the entry of the judgment without admitting or denying the allegations in the Commission’s amended complaint. Previously, on January 3, 2011, the district court entered a judgment against stock promoter Carlton Fleming and certain entities under his control – Regus Investment Group LLC and Thomas Wade Investments, LLC. The Commission’s case against the remaining defendants – Ryan Reynolds and companies under his control – is pending. The Commission acknowledges the assistance of the Financial Industry Regulatory Authority (FINRA) in this matter.”

MANIPULATION OF CHINESE PENNY STOCK PRICES LAND U.S. BROKER IN PRISON

The following excerpt is from the Department of Justice website: Tuesday, September 6, 2011 “WASHINGTON - A New York stock broker was sentenced today to 24 months in prison for his role in a wide-ranging international stock fraud scheme involving the illegal use of bulk commercial emails, or “spamming,” to promote thinly-traded Chinese penny stocks, announced A ssistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division and U.S. Attorney Barbara McQuade for the Eastern District of Michigan. Gregg M. S. Berger, 47, of New York, N.Y., was ordered by U.S. District Judge Marianne O. Battani in Detroit to serve three years of supervised release following his prison term. Berger agreed to forfeit $600,000 to the United States. According to court documents, Berger conspired with Alan Ralsky, Francis Tribble, How Wai John Hui, Scott Bradley and others to carry out a sophisticated stock fraud scheme from January 2005 through December 2007. Ralsky, Tribble, Hui and Bradley have all been convicted and sentenced for their roles in the scheme. “Mr. Berger used his position as a stock broker to generate more than $30 million in illegal proceeds for his co-conspirators, and more than half a million dollars for himself,” said Assistant Attorney General Breuer. “Today’s sentence reflects our sustained commitment to ensuring the integrity of our financial markets, and to holding accountable those who try to manipulate them.” “Schemes that manipulate stock prices undermine public confidence in the stock market, and can have serious impact on our economy,” said U.S. Attorney McQuade. “Illegal activity involving the investment industry has brought financial ruin to many Americans. IRS Criminal Investigation is pleased to bring our forensic accounting skills to this joint venture to put a stop to this and other types of white collar fraud,” said Erick Martinez, Special Agent in Charge of the IRS Criminal Investigation Detroit Field Office. Berger was indicted in the Eastern District of Michigan in December 2010 and pleaded guilty in April 2011 to conspiring to commit securities fraud and wire fraud. The charges arose after a multi-year investigation, led by agents from the FBI, with assistance from the U.S. Postal Inspection Service and the Internal Revenue Service (IRS), revealed a sophisticated and extensive operation that largely focused on running a “pump and dump” scheme, whereby the defendants sent spam touting thinly-traded Chinese penny stocks, drove up their stock price, and reaped profits by selling the stock at artificially inflated prices. In pleading guilty, Berger acknowledged that he established brokerage accounts at the direction of Hui and Tribble, and communicated with Ralsky and Bradley during the conspiracy. Berger’s role was to trade the stocks that were illegally promoted by spam email campaigns, arrange for shares of the stocks to be transferred into the brokerage accounts, and execute stock trades at the direction of Tribble, rather than the direction of the named account holders. Berger also caused the transfer of the proceeds from the trading of the stocks to bank accounts controlled by the conspirators. He also provided confidential account information, including trade amounts, prices, cash balances and wire transfer details to Tribble, Bradley and others involved in the scheme who were not entitled to such information and did not have authorization from the actual named account holders. The stocks pumped-and-dumped included China World Trade Corporation (CWTD), Pingchuan Pharmaceutical Inc. (PGCN), China Digital Media Corporation (CDGT), World Wide Biotech and Pharmaceutical Co. (WWBP), China Mobility Solutions (CHMS) and m-Wise (MWIS). According to court documents, during the course of the scheme, Berger caused the sale of approximately 30 million shares of stock, generating approximately $30 million for the co-conspirators and over $600,000 in commissions for Berger. The case was prosecuted by Assistant U.S. Attorney Terrence Berg of the U.S. Attorney’s Office for the Eastern District of Michigan and Senior Counsel Thomas Dukes of the Criminal Division’s Computer Crime and Intellectual Property Section. The case was investigated by the FBI, IRS and U.S. Postal Inspection Service. The U.S. Securities and Exchange Commission’s Philadelphia Regional Office has provided significant ongoing assistance in this case.”

TWO SEATTLE ATTORNEYS CAUGHT UP IN PUMP AND DUMP SECURITIES SCHEME

Selling products that don’t exist is certainly a very creative way to avoid both fixed and variable overhead costs. Of course selling stock in a company that makes products that don’t exist can be incredibly lucrative. The following is an excerpt from the SEC web site which harkens back to the days of the dot.com bubble. Many dot.com companies had soaring stock prices and never developed any kind of revenue stream because there was never any viable product or service to sell.

“The United States Securities and Exchange Commission (“Commission”) announced that on April 11, 2011, the Honorable Richard A. Jones, United States District Court Judge for the Western District of Washington, entered judgments of permanent injunction and other relief against Defendants David M. Otto, Todd Van Siclen, Charles Bingham and Wall Street PR, Inc.
The final judgment against Otto enjoins the Seattle attorney from violating Sections 5 and 17(a) of the Securities Act of 1933 (“Securities Act”), and Sections 10(b) and 16(a) of the Securities Exchange Act of 1934 (“Exchange Act”) and Rules 10b-5 and 16a-13 promulgated thereunder. In addition to the injunctive relief, the final judgment against Otto orders him to pay $180,000 in civil penalties, $38,610.18 in disgorgement together with $6,751.15 in prejudgment interest and bars him from participating in an offering of penny stock for five years. Otto consented to the entry of the judgment without admitting or denying the allegations in the complaint.
The final judgment against Seattle attorney Van Siclen enjoins him from violating Sections 5 and 17(a)(3) of the Securities Act. In addition to the injunctive relief, the final judgment against Van Siclen orders him to pay $10,000 in civil penalties and bars him from participating in an offering of penny stock for three years. Van Siclen consented to the entry of the judgment without admitting or denying the allegations in the complaint.
The final judgment against Texas stock promoter Bingham and his company Wall Street PR enjoins them from violating Sections 5 and 17(a)(2) and 17(a)(3) of the Securities Act. In addition to the injunctive relief, the final judgment against Bingham orders him to pay $50,000 in civil penalties, $80,153 in disgorgement together with $15,608.43 in prejudgment interest. Bingham and Wall Street PR consented to the entry of the judgments without admitting or denying the allegations in the complaint.
On July 13, 2009, the Commission filed its complaint against the Defendants alleging that they violated the anti-fraud and registration provisions of the federal securities laws by, among other things, conducting a “pump-and-dump” scheme in which the defendants used a false and misleading public relations campaign to tout their client MitoPharm Corporation’s products. In reality, the products did not exist. Otto sold MitoPharm stock at a profit before its stock price plunged after the close of the promotional campaign.
In addition to the relief described above, Otto and Van Siclen each consented to the entry of an order in separate Commission administrative proceedings suspending them, pursuant to Rule 102(e) of the Commission's Rules of Practice, from appearing or practicing as attorneys before the Commission with the right to apply for reinstatement after three years and one year, respectively.”

This case describes some pretty incredible actions taken by officers of the court. Based upon this case and other similar cases, I question what law schools are teaching now days.

SEC ALLEGES HIGH TECH PUMP AND DUMP: IS THIS 1999 AGAIN?

Back in the 1990’s when technology stocks crashed it was found that many tech companies were in fact just sham organizations that had no workable business models. The companies existed only to sell stock to investors with the proceeds of the stock sales going to the corporate executives. At the end of the 1990’s most of these sham companies just folded and the executives cashed out billions of dollars.

Back in the 1990’s most of the sham companies had businesses based upon the high speed communications technologies like the internet. In the case below the Sec alleges that a technology company created a pump-and-dump fraud based on the current popular tech fad based upon saving the envirorment. It seems everyone wants a new magical technology to save the enviorment when sacrifices like driving a little less or adjusting environmental controls a few degrees is just too hard.

The following is an excerpt from the SEC website which explains in detail the formula for a recent alleged pump-and-dump scheme:

“Washington, D.C., Feb. 18, 2011 — The Securities and Exchange Commission today charged a group of seven individuals who perpetrated a fraudulent pump-and-dump scheme in the stock of a sham company that purported to provide products and services to fight global warming.


The SEC alleges that the group included stock promoters, traders, and a lawyer who wrote a fraudulent opinion letter. The scheme resulted in more than $7 million in illicit profits from sales of stock in CO2 Tech Ltd. at artificially inflated prices. Despite touting impressive business relationships and anti-global warming technology innovations, CO2 Tech did not have any significant assets or operations. The company was purportedly based in London, and its stock prices were quoted in the Pink Sheets.
According to the SEC’s complaint filed in U.S. District Court for the Southern District of Florida, the scheme was perpetrated through Red Sea Management Ltd., a Costa Rican asset protection company that laundered millions of dollars in illicit trading proceeds out of the United States on behalf of its clients. The U.S. Department of Justice today announced related criminal charges against six of the individuals.
“This group of illicit stock promoters sought to hide their scheme behind offshore entities, but their misconduct was exposed by the excellent cooperation of law enforcement agencies here and abroad,” said Cheryl Scarboro, Associate Director in the SEC’s Division of Enforcement.
According to the SEC’s complaint, the fraudulent pump-and-dump scheme in CO2 Tech stock occurred from late 2006 to April 2007 through the efforts of the following individuals:
Jonathan R. Curshen, a Sarasota, Fla., resident who founded and led Red Sea.
David C. Ricci and Ronny Morales Salazar of San Jose, Costa Rica, who were Red Sea stock traders.
Ariav “Eric” Weinbaum and Yitzchak Zigdon of Israel, who were Red Sea clients.
Robert L. Weidenbaum of Coral Gables, Fla., a stock promoter who operates a company called CLX & Associates.
Michael S. Krome of Lake Grove, N.Y., a lawyer who allegedly wrote a fraudulent opinion letter.
The SEC’s complaint alleges that CO2 Tech falsely touted business relationships that the company had not formed, including a relationship with the Boeing Company. In fact, there were no communications, correspondence or understandings between CO2 Tech and Boeing.
The SEC alleges that Weinbaum and Zigdon initiated the pump-and-dump of CO2 Tech by utilizing the services of Krome, who issued a fraudulent opinion letter to enable them to have the restrictive legend removed from their CO2 Tech stock certificate. This provided them nearly full control over the freely tradeable shares of CO2 Tech stock. Weinbaum then hired Red Sea to sell massive quantities of CO2 Tech stock to the investing public through its web of nominee brokerage accounts. Zigdon caused the materially false and misleading information about CO2 Tech to be disseminated in press releases and on CO2 Tech’s website.
According to the SEC’s complaint, Weinbaum hired Weidenbaum to redistribute the false information through websites, spam e-mails and fax blasts. Weidenbaum enlisted a group of stock promoters who then executed illegal “matched orders” with Red Sea’s nominee brokerage accounts in order to “jump-start” the market and increase the price of the stock. As a result of the false media campaign and the illegal matched orders, the market price of CO2 Tech stock increased 81 percent increase in one day and trading volume increased 1,573 percent.
The SEC alleges that after Weinbaum hired Red Sea, he directed Red Sea stock traders Ricci and Salazar to sell the stock. Ricci and Salazar placed multiple layered orders to sell CO2 Tech stock – thereby creating the false appearance that the market for the stock was deeper than it actually was. This coordinated misconduct enabled stock sales at artificially inflated prices for profits of more than $7 million at the expense of unsuspecting investors.
The SEC’s complaint alleges that Curshen, Ricci, Salazar, Weinbaum, Zigdon, and Krome violated Section 5(a), (c) and 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. Weidenbaum is charged with aiding and abetting Weinbaum and Zigdon’s violations of Exchange Act 10(b) and Rule 10b-5. Without admitting or denying the allegations in the complaint, Ricci settled the SEC’s charges by agreeing to an injunction against future violations of these provisions and a penny stock bar.
In the related criminal action, charges brought by the Justice Department’s Criminal Division were unsealed against Curshen, Krome, Salazar, Weidenbaum, Weinbaum, and Zigdon. The defendants are charged in the Southern District of Florida variously with conspiracy to commit securities, mail and wire fraud; wire fraud; mail fraud; violating the securities regulation laws and obstruction of justice.

The SEC acknowledges the assistance of the Fraud Section of the Criminal Division of the U.S. Department of Justice, the Federal Bureau of Investigation, and the U.S. Postal Inspection Service. The SEC also acknowledges the assistance of the Financial Industry Regulatory Authority (FINRA) and several foreign law enforcement agencies that provided substantial support to the investigation, including the Costa Rican Police, British Columbia Securities Commission, Israel Securities Authority, United Kingdom Financial Services Authority, and The City of London Police.”

The list of organizations and governments cooperating in the above case is quite impressive. This was relatively a small case in case of the amount of money involved. At least comparing this case with the alleged trillion dollars or more defrauded from investors worldwide by large banking and insurance organizations in the recent real estate crash. The moral being: Help to steal millions of dollars and you will be prosecuted. Help to steal trillions of dollars and you will get a job advising the president and congress on how to write and enforce regulatory laws. In fact, you might even get a job in the cabinet.