SEC ANNOUNCES $6.5 MILLION JUDGEMENT IN CASE INVOLVING STOCK MANIPULATION THROUGH FALSE PRESS RELEASES

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION 

Litigation Release No. 23349 / September 16, 2015

Securities and Exchange Commission v. 8000, Inc., Jonathan E. Bryant, Thomas J. Kelly, and Carl N. Duncan, Esq., Civil Action No. 12-civ-7261 (S.D.N.Y., Complaint filed Sept. 27, 2012)

Court Orders Company to Pay More Than $6.5 Million in U.S. Stock Manipulation Scheme

The Securities and Exchange Commission announced today that on September 14, 2015, a federal court in New York entered a final judgment by default against 8000, Inc., a Virginia-based company, that ordered it to pay $6,525,000 in a civil penalty in a stock manipulation case filed by the Commission in 2012. The Commission alleged that the Company issued numerous false press releases to inflate the value of the company so that certain parties could benefit.

In addition to 8000, Inc., the Commission's complaint, filed on September 27, 2012, also charged Jonathan Bryant, a consultant for the company as well as the company's former Chief Executive Officer, Thomas Kelly of Levittown, Pennsylvania, and the company's attorney, Carl N. Duncan of Bethesda, Maryland. The complaint alleged that the defendants participated in a scheme to manipulate the trading volume and price of 8000 Inc.'s common stock by disseminating false information about the company and simultaneously selling or facilitating the sale of its securities which were not supposed to be for sale to the general public. According to the complaint, from November 2009 through October 2010, Bryant and Kelly disseminated financial reports and press releases falsely representing that 8000, Inc. had millions of dollars in capital financing and revenues when, in fact, the company had neither. As 8000, Inc.'s stock price rose based on the false information they were disseminating, Bryant profited by selling 56.8 million "restricted" shares of 8000, Inc. into the market. Because the shares were restricted, they should not have been sold into the market at that time. The complaint alleged that Duncan provided false legal opinions removing the trading restrictions on the stock, and that Kelly profited from the scheme by buying and selling the company's securities in the secondary market. The complaint alleged that the defendants' scheme increased the volume of trading in 8000, Inc. by 93% and the company's stock price from less than $0.01 per share to $0.42 per share between November 2009 and October 2010.

In addition to ordering 8000, Inc. to pay $6.5 million, the final judgment entered by the United States District Court for the Southern District of New York permanently enjoins 8000, Inc. from future violations of various antifraud and securities registration sections of the federal securities laws, including Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933 (Securities Act) and Section 10(b) of the Securities Exchange Act of 1934 (Exchange Act) and Rule 10b-5 thereunder.

The judgment against 8000, Inc. concludes the Commission's case. Defendants Bryant, Kelly, and Duncan all previously settled the Commission's action. Bryant consented to the entry of a final judgment that was entered on April 7, 2015. The final judgment permanently enjoined Bryant from future violations of Sections 5(a), 5(c), and 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. The final judgment also ordered Bryant to disgorge the $2,969,525 in profits that he realized from selling 8000, Inc.'s restricted securities and to pay $198,659.70 in pre-judgment interest. Additionally, the final judgment barred Bryant from acting as an officer or director of any issuer that has a class of securities registered pursuant to Section 12 of the Exchange Act, and permanently barred him from participating in an offering of a penny stock.

Kelly consented to the entry of a final judgment that was entered on June 6, 2013, which permanently enjoined Kelly from violating Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. It also permanently barred Kelly from acting as an officer or director of any issuer that has a class of securities registered pursuant to Section 12 of the Exchange Act, and permanently barred him from participating in an offering of a penny stock. On September 2, 2014, after a hearing, the court ordered Kelly to pay $415,569 in profits that he realized from trading in 8000 Inc.'s securities in the secondary market and to pay $46,697 in pre-judgment interest.

Duncan agreed to settle the Commission's action at the time it was filed. In December 2012, the court entered a final judgment against Duncan that permanently enjoined Duncan from violating Sections 5(a), 5(c), and 17(a)(2) of the Securities Act, permanently enjoined him from participating in the preparation and issuance of certain opinion letters, bars him from participating in an offering of a penny stock, and ordered him to disgorge $15,570 in unlawful proceeds and to pay $524.98 in prejudgment interest and a $25,000 civil money penalty. Duncan also consented to an administrative order issued pursuant to Rule 102(e)(3) of the Commission's Rules of Practice permanently suspending him from appearing or practicing before the Commission as an attorney.

The SEC would like to thank the Financial Industry Regulatory Authority for their assistance in this matter.

FINAL JUDGEMENTS ENTERED IN STOCK MANIPULATION CASE

The following excerpt is from the SEC website:

February 10, 2012
“The Securities and Exchange Commission announced today that Chief Judge Gregory M. Sleet of the United States District Court for the District of Delaware entered final judgments against Defendants Nathan M. Michaud and Gerard J. D’Amaro on January 24, 2012, and Defendant Marc J. Riviello on February 3, 2012, in SEC v. Dynkowski, et al., Civil Action No. 1:09-361, a stock manipulation case the SEC filed on May 20, 2009, and amended on March 25, 2010 to charge additional individuals. The SEC’s complaint alleges that Michaud, D’Amaro, and Riviello each participated in market manipulation schemes with Defendant Pawel P. Dynkowski.

As alleged in the complaint, the schemes generally followed the same pattern: Dynkowski and his accomplices agreed to sell large blocks of shares for penny stock companies in exchange for a portion of the proceeds. The shares were put in nominee accounts that Dynkowski and his accomplices controlled. The defendants artificially inflated the market price of the stocks through manipulative trading, often timed to coincide with false or misleading press releases, and then sold shares obtained from the issuers and divided the illicit proceeds.

The complaint alleges that in 2006, Dynkowski, Riviello, Michaud and others participated in a manipulation scheme involving the stock of Asia Global Holdings, Inc., which generated over $4 million in illicit profits. As alleged in the complaint, Dynkowski and Michaud manipulated the price of Asia Global Holdings, Inc. stock using wash sales, matched orders, and other manipulative trading, while Riviello used his position as a registered representative at a broker-dealer to open a series of nominee accounts and execute sell orders for shares obtained from the issuer. The complaint further alleges that Riviello helped launder proceeds from a separate manipulation scheme involving the stock of GH3 International, Inc.

That same year, the complaint alleges, Dynkowski, D’Amaro and others participated in a manipulation scheme involving the stock of Playstar Corp., which generated over $1 million in illicit profits. As alleged in the complaint, D’Amaro arranged for the company to issue misleading press releases that coincided with Dynkowski’s manipulative trading. The complaint further alleges that D’Amaro provided the nominee accounts that were used to sell the shares received from the issuer.

To settle the SEC’s charges, D’Amaro consented to a final judgment that permanently enjoins him from violating Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933 (“Securities Act”), and Section 10(b) of the Securities Exchange Act of 1934 (“Exchange Act”) and Rule 10b-5 thereunder, orders disgorgement of $177,044 and prejudgment interest of $40,859, and bars D’Amaro from participating in any offering of a penny stock. In a related criminal case, D’Amaro previously pled guilty to conspiracy to commit securities fraud and engage in money laundering and was sentenced to three years in prison and ordered to pay criminal forfeiture of $1.49 million. U.S. v. D’Amaro, Criminal Action No. 09-54-SLR (D. Del.).
Riviello consented to a final judgment that permanently enjoins him from violating Sections 5(a), 5(c), and 17(a) of the Securities Act, and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and orders disgorgement of $248,190 and prejudgment interest of $35,078, which was waived based upon his inability to pay. In related administrative proceedings, Riviello 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, and barring him from participating in any offering of a penny stock. In a related criminal case, Riviello previously pled guilty to conspiracy to engage in money laundering and was sentenced to 8 months in prison and ordered to pay criminal forfeiture of $107,000. U.S. v. Riviello, Criminal Action No. 09-23-SLR (D. Del.).

Michaud consented to a final judgment that permanently enjoins him from violating Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and orders him to pay disgorgement of $40,600, prejudgment interest of $3,314, and a civil penalty of $50,000.

Additionally, on December 22, 2011, the SEC filed a second amended complaint charging James Meagher as an additional defendant in this case. The complaint alleges that, in 2007, Dynkowski and Meagher carried out a manipulation scheme involving the stock of Xtreme Motorsports of California, Inc. As alleged in the complaint, Dynkowski and Meagher manipulated the price of Xtreme Motorsports stock using wash sales, matched orders and other manipulative trading, in a scheme that generated over $250,000 in illicit profits. The complaint alleges that Meagher violated Sections 5(a), 5(c) and 17(a) of the Securities Act, and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder.  The complaint seeks against Meagher permanent injunctive relief, disgorgement of ill-gotten gains with prejudgment interest, civil monetary penalties, and an order barring him from participating in any penny stock offerings.

The SEC thanks the following agencies for their cooperation and assistance in connection with this matter: the U.S. Attorney’s Office for the District of Delaware; the Delaware State Police; United States Immigration and Customs Enforcement, Department of Homeland Security, Homeland Security Investigations; and the Department of the Treasury, Internal Revenue Service, Criminal Investigation.”