SEC AND FORMER FDA CHEMIST SETTLE CHARGES

The following excerpt is from the SEC website: The following excerpt is from the SEC website: November 30, 2011 “The Securities and Exchange Commission announced that on November 29, 2011, the Honorable Deborah Chasanow, United States District Judge for the District of Maryland, entered a final judgment against Cheng Yi Liang, in SEC v. Cheng Yi Liang, et al., C.A. No. 8:11-cv-00819-DKC (D. Md.), an insider trading case the SEC filed on March 29, 2011. Liang is a former U.S. Food and Drug Administration (FDA) chemist who worked in the FDA's Center for Drug Evaluation and Research. The complaint, amended June 2, 2011, alleged that from at least July 2006 until March 2011, Liang traded based on confidential information he obtained from the FDA in advance of at least 28 public announcements about FDA drug approval decisions for profits and losses avoided of more than $3.7 million. Liang concealed his trading by trading in eight brokerage accounts in the name of six nominees, including his 84-year-old mother and 87-year-old father, both citizens and residents of China. For example, the SEC alleged that Liang traded in advance of an FDA announcement approving Clinical Data's application for the drug Viibryd. Liang accessed a confidential FDA database that contained critical documents and information about the FDA's review of Clinical Data's application, and then used that information to purchase more than 46,000 shares of Clinical Data at a cost of more than $700,000. After the markets closed on Friday, January 21, 2011, the FDA issued a press release approving Viibryd. Clinical Data's stock price rose by more than 67 percent the following Monday and Liang sold his entire Clinical Data position in less than 15 minutes for a profit of approximately $380,000. To settle the SEC's charges, Liang, without admitting or denying the allegations in the complaint, agreed to entry of a final judgment that: (i) enjoins him 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; and (ii) requires Liang to pay disgorgement of $3,776,152, which will be deemed satisfied by the forfeiture order entered in the parallel criminal case, United States v. Cheng Yi Liang, Criminal No. 8:11-cr-00530-DKC8 (D. Md.). In that case, Liang pleaded guilty to charges of securities fraud and making false statements.”

SEC FILES INJUCTION AGAINST ILLINOIS MAN AND HIS COMPANY

The following excerpt is from the SEC website: November 22, 2011 “The Securities and Exchange Commission today announced that on November 18, it filed a civil injunctive action against Patrick G. Rooney (“Rooney”), a resident of Oakbrook, Illinois, and his company, Solaris Management, LLC (“Solaris Management”), the investment adviser to the Solaris Opportunity Fund, LP (“Solaris Fund”) for the fraudulent misuse of the Solaris Fund’s assets and other illegal conduct. According to the SEC’s complaint, the Solaris Fund is purportedly a non-directional hedge fund with approximately 30 investors and reported assets of $16,277,780 as of December 2008. Contrary to the Solaris Fund’s offering documents and marketing materials, Rooney and Solaris Management allegedly made a radical change in the Solaris Fund’s investment strategy by becoming wholly invested in Positron Corp. (“Positron”), a financially troubled microcap company of which Rooney has been Chairman since 2004. Rooney, who has received compensation from Positron since September 2005, allegedly misused the Solaris Fund’s money by investing over $3.6 million in Positron through both private transactions and market purchases. Many of the private transactions were undocumented while other investments were loans to Positron at 0% interest. The complaint alleges that Rooney and Solaris Management hid the Positron investments and Rooney’s relationship with the company from the Solaris Fund’s investors for over four years. Although Rooney finally told investors about the Positron investments in a March 2009 newsletter, he allegedly lied by telling them he became Chairman to safeguard the Solaris Funds’ investment. The complaint further alleges that these investments benefited Positron and Rooney while providing the Solaris Fund with a concentrated, undiversified, and illiquid position in a cash-poor company with a lengthy track record of losses. The SEC’s complaint, filed in the United States District Court for the Northern District of Illinois, charges Rooney and Solaris Management with violating Section 17(a) of the Securities Act of 1933, Sections 10(b) of the Securities Exchange Act of 1934 (“Exchange Act”) and Rules 10b-5 and thereunder, and Sections 206(1), 206(2), and 206(4) of the Investment Advisers Act of 1940 (“Advisers Act”) and Rule 206(4)-8(a)(1) and (a)(2) thereunder. The complaint also charges Rooney with aiding and abetting Solaris Management’s violations of Section 206(4) of the Advisers Act and Rule 206(4)-8(a)(1) thereunder, and Rooney and Solaris Management with aiding and abetting the Solaris Fund’s violation of Section 10(b) of the Exchange Act and Rule 10b-5(b) thereunder, and Section 13(d)(1) of the Exchange Act and Rule 13d-1 thereunder. The SEC is seeking permanent injunctions, disgorgement of any ill-gotten gains plus prejudgment interest and civil monetary penalties against Rooney and Solaris Management, and an officer and director bar against Rooney.”

SEC GOES AFTER HEDGE FUNDS AND MANGERS FOR ALLEGED FRAUD AND OTHER ALLEGED CRIMES

The following excerpt is from the SEC website: “Washington, D.C., Dec. 1, 2011 — As part of an initiative to combat hedge fund fraud by identifying abnormal investment performance, the Securities and Exchange Commission today announced enforcement actions against three separate advisory firms and six individuals for various misconduct including improper use of fund assets, fraudulent valuations, and misrepresenting fund returns. Under the initiative — the Aberrational Performance Inquiry — the SEC Enforcement Division’s Asset Management Unit uses proprietary risk analytics to evaluate hedge fund returns. Performance that appears inconsistent with a fund’s investment strategy or other benchmarks forms a basis for further scrutiny. In particular, the SEC alleges that the firms and managers engaged in a wide variety of illegal practices in the management of hedge funds or private pooled investment vehicles, including fraudulent valuation of portfolio holdings, misuse of fund assets, and misrepresentations to investors about critical attributes such as performance, assets, liquidity, investment strategy, valuation procedures, and conflicts of interest. “We’re using risk analytics and unconventional methods to help achieve the holy grail of securities law enforcement — earlier detection and prevention,” said Robert Khuzami, Director of the SEC’s Division of Enforcement. “This approach, especially in the absence of a tip or complaint, minimizes both the number of victims and the amount of loss while increasing the chance of recovering funds and charging the perpetrators.” Robert Kaplan and Bruce Karpati, Co-Chiefs of the SEC Enforcement Division’s Asset Management Unit, added, “The extraordinary returns reported by these advisers and portfolio managers were, in most cases, too good to be true. In other cases, outlier returns were a telltale sign that something else was amiss. We are applying analytics across the investment adviser space — beyond performance and beyond hedge funds.” The SEC has filed several enforcement actions to date stemming from this initiative. Of the four actions announced today, three were filed in federal court and one was brought as an administrative proceeding. Michael Balboa and Gilles De Charsonville The SEC today charged two individuals for engaging in a fraudulent scheme to overvalue the reported returns and net asset value of the Millennium Global Emerging Credit Fund. At its peak in October 2008, the hedge fund’s reported assets were $844 million. The SEC’s complaint alleges that Michael Balboa, the fund’s former portfolio manager, schemed with two European-based brokers including Gilles De Charsonville of BCP Securities LLC to inflate the fund’s reported monthly returns and net asset value by manipulating its supposedly independent valuation process. Separately, the U.S. Attorney’s Office for the Southern District of New York announced the arrest of Balboa and simultaneous filing of a criminal action against him. According to the SEC complaint, from at least January to October 2008, Balboa surreptitiously provided De Charsonville and another broker with fictional prices for two of the fund’s illiquid securities holdings for them to pass on to the fund’s outside valuation agent and its auditor. The scheme caused the fund to drastically overvalue these securities holdings by as much as $163 million in August 2008, which in turn allowed the fund to report inflated and falsely-positive monthly returns. By overstating the fund’s returns and overall net asset value, Balboa was able to attract at least $410 million in new investments, deter about $230 million in eligible redemptions, and generate millions of dollars in inflated management and performance fees. The SEC’s investigation, which continues, was conducted by Bill Conway, Brian Fitzpatrick, and Alison Conn of the New York Regional Office. Nancy Brown is leading the SEC’s litigation effort. The SEC acknowledges the assistance and cooperation of the U.S. Attorney, U.S. Postal Inspection Service, U.K. Financial Services Authority, Bermuda Monetary Authority, Comisión Nacional del Mercado de Valores, Guernsey Financial Services Authority, and Nigeria Securities and Exchange Commission. ThinkStrategy Capital Management and Chetan Kapur The SEC charged New York-based hedge fund firm ThinkStrategy Capital Management LLC and its sole managing director Chetan Kapur with fraud in connection with two separate hedge funds they managed (ThinkStrategy Capital Fund and TS Multi-Strategy Fund). At its peak in 2008, ThinkStrategy managed approximately $520 million in assets. The SEC’s complaint filed on Nov. 9, 2011 alleges that ThinkStrategy and Kapur engaged in a pattern of deceptive conduct designed to bolster their track record, size, and credentials. In particular, they materially overstated the performance of the Capital Fund and gave investors the false impression that the fund’s returns were consistently positive and minimally volatile. ThinkStrategy and Kapur also repeatedly inflated the firm’s assets, exaggerated the firm’s longevity and performance history, and misrepresented the size and credentials of firm’s management team. ThinkStrategy and Kapur consented to the entry of judgments permanently enjoining them from violating the antifraud provisions of the securities laws, and have agreed to pay financial penalties and disgorgement in an amount to be determined by a federal court. Kapur consented to the entry of an SEC order, instituted Nov. 30, 2011, barring him from association with any investment adviser, broker, dealer, municipal securities dealer, municipal advisor, transfer agent, or nationally recognized statistical rating organization. The SEC’s investigation was conducted by Darren Long, Jeffrey Anderson, and Scott Weisman. Michael Semler is leading the remaining litigation effort. Patrick Rooney and Solaris Management The SEC charged Oakbrook, Ill. resident Patrick G. Rooney and his company Solaris Management LLC for fraudulently misusing the assets of the Solaris Opportunity Fund LP, to which it was the investment adviser. According to the SEC’s complaint filed on Nov. 16, 2011 in federal court in Chicago, Rooney and Solaris made a radical change in the fund’s investment strategy, contrary to the fund’s offering documents and marketing materials, by becoming wholly invested in Positron Corp., a financially troubled microcap company. The SEC alleges that Rooney, who has been Chairman of Positron since 2004 and received salary and stock options from Positron since September 2005, misused the Solaris Fund’s money by investing more than $3.6 million in Positron through both private transactions and market purchases. Many of the private transactions were undocumented while other investments were interest-free loans to Positron. Rooney and Solaris hid the Positron investments and Rooney’s relationship with the company from the fund’s investors for over four years. Although Rooney finally told investors about the Positron investments in a March 2009 newsletter, he allegedly lied by telling them he became Chairman to safeguard the fund’s investments. These investments benefited Positron and Rooney while providing the fund with a concentrated, undiversified, and illiquid position in a cash-poor company with a lengthy track record of losses. The SEC’s investigation was conducted by Andrew Shoenthal, Malinda Grish, Ann Tushaus, Linda Gerstman, and Paul Montoya of the Chicago Regional Office. Timothy Leiman is leading the litigation effort. LeadDog Capital Markets, Chris Messalas and Joseph LaRocco The SEC instituted administrative proceedings against unregistered investment adviser LeadDog Capital Markets LLC and its general partners and owners Chris Messalas and Joseph LaRocco for misrepresenting or failing to disclose material information to investors in the LeadDog Capital LP fund. In proceedings instituted on Nov. 15, 2011, the SEC Division of Enforcement alleges that LeadDog, Messalas, and LaRocco induced investors to invest in a hedge fund they controlled through material misrepresentations and omissions concerning among other things Messalas’s negative regulatory history as a securities professional, compensation received by Messalas and LaRocco in connection with the fund’s investments, and Messalas’s substantial ownership interest in, and control of, some of the same companies to which he directed fund investments. In addition, LeadDog, Messalas, and LaRocco allegedly misrepresented to, and concealed from, existing and prospective investors the substantial conflicts of interests and related party transactions that characterized the fund’s illiquid investments. For example, to induce one elderly investor to invest $500,000 in the fund, LeadDog, Messalas, and LaRocco represented falsely that at least half of the fund’s assets were liquid and could be marked to market each day, and that the investor could exit the fund at any time.”

COURT REFUSES APPROVAL OF SEC SETTLEMENT WITH CITIGROU

The following excerpt is from the SEC website: November 28, 2011 Public Statement by SEC Staff: by Robert Khuzami Director, Division of Enforcement U.S. Securities and Exchange Commission Washington, D.C. “While we respect the court's ruling, we believe that the proposed $285 million settlement was fair, adequate, reasonable, in the public interest, and reasonably reflects the scope of relief that would be obtained after a successful trial. The court's criticism that the settlement does not require an 'admission' to wrongful conduct disregards the fact that obtaining disgorgement, monetary penalties, and mandatory business reforms may significantly outweigh the absence of an admission when that relief is obtained promptly and without the risks, delay, and resources required at trial. It also ignores decades of established practice throughout federal agencies and decisions of the federal courts. Refusing an otherwise advantageous settlement solely because of the absence of an admission also would divert resources away from the investigation of other frauds and the recovery of losses suffered by other investors not before the court. The settlement provisions cited by the court have been included in settlements repeatedly approved for good reason by federal courts across the country — including district courts in New York in cases involving similar misconduct. We also believe that the complaint fully and accurately sets forth the facts that support our claims in this case as well as the basis for the proposed settlement. These are not 'mere' allegations, but the reasoned conclusions of the federal agency responsible for the enforcement of the securities laws after a thorough and careful investigation of the facts. Finally, although the court questions the amount of relief obtained, it overlooks the fact that securities law generally limits the disgorgement amount the SEC can recover to Citigroup's ill-gotten gains, plus a penalty in an amount up to a defendant's gain. It was for this reason that we sought to recover close to $300 million — all of which we intended to deliver to harmed investors. The SEC does not currently have statutory authority to recover investor losses. We will continue to review the court's ruling and take those steps that best serve the interests of investors.”

MAN MAKES OVER $1.2 MILLION IN ALLEGED UNREGISTERED SECURITES BUT, SEC SEEKS DISGORGEMENT

The following excerpt is from the SEC website: November 23, 2011 “The Securities and Exchange Commission filed a civil injunctive action against Myron Weiner, relating to his unregistered sale of shares of Spongetech Delivery Systems, Inc. (“Spongetech”) in 2009. In its complaint, the Commission alleges that Weiner purchased the shares from a Spongetech affiliate at a discounted price of 5 cents, and then sold the shares into the public market less than three months later for 20 cents, for a profit of $1,215,057. The Commission’s complaint alleges that Weiner’s sales were not registered with the Commission, and no exemption from the registration requirements of the federal securities laws applied. The Commission’s complaint seeks a final judgment: (1) enjoining Weiner from violating Section 5 of the Securities Act of 1933 (registration provisions); (2) requiring the payment of disgorgement of $1,215,057, plus prejudgment interest of $80,135; (3) requiring payment of a civil penalty of $50,000; and (5) barring Weiner for one year from participating in the offering of any penny stock. The U.S. Attorney’s Office for the Eastern District of New York filed a related forfeiture action. The Commission wishes to thank the U.S. Attorney’s Office, the Federal Bureau of Investigation and the Internal Revenue Service for their assistance in connection with this matter.”

FINAL JUDGEMENT ENTERED AGAINST FORMER CEO OF CHINA VOICE HOLDING CORP.

The following excerpt is from the SEC website: “On November 22, 2011, the Securities and Exchange Commission announced that the Honorable Reed O’Connor, United States District Judge for the Northern District of Texas, entered a Final Judgment against William F. Burbank, IV, the former Chief Executive Officer and President of China Voice Holding Corp. to settle charges that he made false and misleading statements and material omissions regarding China Voice and selectively disclosed material, non-public information regarding the company. Without admitting or denying the allegations in the SEC’s complaint, Burbank agreed to entry of a Final Judgment permanently enjoining him from violating Section 17(a) of the Securities Act of 1933, 10(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5 thereunder and from aiding and abetting violations of Section 13(a) of the Exchange Act and Regulation FD thereunder. The Final Judgment, entered on November 21, also orders Burbank to pay $60,333 in disgorgement and prejudgment interest and a civil penalty of $60,000. In addition, Burbank is barred from ten years from serving as an officer or director of a public company and from participating in an offering of a penny stock. The Commission filed an emergency action on April 28, 2011, alleging that China Voice’s co-founder and former Chief Financial Officer, David Ronald Allen, with the assistance of Alex Dowlatshahi and Christopher Mills, and numerous related entities, launched what became a Ponzi scheme that sought to raise at least $8.6 million from investors across the country. The Commission alleged that, contrary to what investors were told, proceeds were used to pay back earlier investors; to make payments to Allen, Dowlatshahi, and Mills; and to make payments to Allen-affiliated business, including China Voice. The Commission’s complaint alleged that Burbank also received ill-gotten gains from this Ponzi scheme. The SEC’s complaint further charged Burbank and Allen for a series of fraudulent statements about China Voice’s financial condition and business prospects and with selectively disclosing material, non-public information regarding the company to certain shareholders. In addition, the SEC charged China Voice shareholders Ilya Drapkin and Gerald Patera with financing stock promotion campaigns regarding China Voice, including a blast fax campaign conducted by Robert Wilson. The Commission’s case is still pending against remaining defendants China Voice, Allen, Wilson, and various of their related entities.”