SEC CHARGES CEO, HIS COMPANY AND A STOCK PROMOTER WITH MARKET MANIPULATION

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION
July 6, 2012
SEC Charges Company, CEO, and Stock Promoter With Market Manipulation
The Securities and Exchange Commission announced today that it charged Axius, Inc., its President and CEO, Roland Kaufmann, and stock promoter Jean-Pierre Neuhaus with engaging in a fraudulent broker bribery scheme designed to manipulate the market for Axius’ common stock. The Commission’s complaint, filed in federal court in Brooklyn, alleges that beginning in at least January 2012, Kaufmann and Neuhaus engaged in an undisclosed kickback arrangement with an individual (“Individual A”) who claimed to represent a group of registered representatives with trading discretion over the accounts of wealthy customers. Kaufmann and Neuhaus promised to pay kickbacks of between 26% and 28% to Individual A and the registered representatives he purported to represent in exchange for the purchase of up to $5 million of Axius stock through the customers’ accounts.

The complaint further alleges that on February 16 and 17, 2012, Kaufmann instructed Individual A to purchase approximately 14,000 shares of Axius stock for a total of approximately $49,000 through matched trades using detailed instructions concerning the size, price and timing of the purchase orders. Thereafter, Kaufmann paid Individual A bribes of approximately $13,700.

The complaint charges Neuhaus, Kaufmann, and Axius with violating Section 17(a)(1) and (a)(3) of the Securities Act of 1933 and Sections 9(a)(1) and 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5(a) and (c). The Commission seeks permanent injunctive relief, disgorgement of ill-gotten gains, plus pre-judgment interest, and civil penalties from all defendants, an order prohibiting Neuhaus and Kaufmann from participating in any offering of penny stock, and an order prohibiting Kaufmann from serving as an officer or director of a public company.

The Commission acknowledges assistance provided by the U.S. Attorney’s Office for the Eastern District of New York, and the Federal Bureau of Investigation in this matter.

TWO INDICTED FOR ALLEGEDLY BRIBING STOCK BROKERS TO MANIPULATE A STOCK PRICE

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION
Thursday, July 5, 2012
CEO of Axius Inc. and Finance Professional Indicted for Alleged Roles in Scheme to Bribe Stock Brokers and Manipulate Stock Prices
WASHINGTON – The chief executive officer (CEO) of Axius Inc., a Nevada corporation, and a finance professional were indicted today on multiple charges for their alleged roles in a scheme to bribe stock brokers and manipulate the share price of Axius stock, announced Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division and U.S. Attorney Loretta E. Lynch for the Eastern District of New York.

Roland Kaufmann, a Swiss citizen and the CEO of Axius, and Jean-Pierre Neuhaus, a Swiss citizen and finance professional, were each charged in an indictment filed today in the Eastern District of New York with one count of conspiracy to commit securities fraud and to violate the Travel Act, one count of securities fraud, one count of wire fraud, one count of violating the Travel Act, one count of conspiracy to commit money laundering and one count of money laundering.  According to court documents, Axius is incorporated in Nevada and its principal offices are in Dubai, United Arab Emirates.  Axius is a “holding company and business incubator” that develops other businesses.

“As CEO of Axius, Mr. Kaufmann allegedly conspired with Mr. Neuhaus to fraudulently manipulate the value of his company’s stock,” said Assistant Attorney General Breuer.  “According to today’s indictment, he attempted to bribe stock brokers into artificially propping up the value of Axius stock.  With our partners in the U.S. Attorneys’ Offices, the Criminal Division’s Fraud Section is pursuing a nationwide effort to investigate and prosecute fraudulent conduct in our securities markets.”

“Rather than rely on the market to set the true value of Axius’ stock, the defendants allegedly sought to buy the best price possible through bribery and deception,” said U.S. Attorney Lynch.  “Their scheme stood to enrich themselves at the expense of the investing public.  We will vigorously investigate and prosecute any such corruption in the securities markets.”

“Conspiring to inflate the price of Axius shares artificially was likely to result in unjust enrichment for the defendants and undeserved losses for investors,” said Assistant Director-in-Charge Janice K. Fedarcyk of the FBI in New York.  “Market-driven fluctuations in share prices are risks investors have to accept. Illegal manipulations become the subject of FBI investigations.”

The indictment alleges that Kaufmann, 60, agreed with Neuhaus, 55, to defraud investors in Axius common stock by bribing stock brokers and manipulating the share price.  As part of the scheme, they enlisted the assistance of an individual they believed to have access to a group of corrupt stock brokers; this individual was in fact an undercover law enforcement agent.  Kaufmann and Neuhaus believed that the undercover agent controlled a network of stockbrokers in the United States with discretionary authority to trade stocks on behalf of their clients.

The indictment alleges that Kaufmann and Neuhaus instructed the undercover agent to direct brokers to purchase Axius shares that were owned or controlled by Kaufmann in return for a secret kickback of approximately 26 to 28 percent of the share price.  Kaufmann and Neuhaus allegedly instructed the undercover agent as to the price the brokers should pay for the stock, and Kaufmann specifically instructed the undercover agent that the brokers would have to pay gradually higher prices for the shares they were buying.  The indictment alleges that Kaufmann and Neuhaus directed the undercover agent that the brokers were to refrain from selling the Axius shares they purchased on behalf of their clients for a one-year period.  By preventing sales of Axius stock, Kaufmann and Neuhaus allegedly intended to maintain the fraudulently inflated share price for Axius stock.

Kaufmann and Neuhaus were originally charged in a criminal complaint filed in the Eastern District of New York on March 8, 2012.  They were arrested on March 8, 2012.  No investors were actually defrauded in the undercover operation.

In a related action, the Securities and Exchange Commission (SEC) today filed a civil enforcement action against Kaufmann and Neuhaus in the Eastern District of New York.  The department thanks the SEC for its cooperation in this matter.

This case is being prosecuted by Trial Attorney Justin Goodyear of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Shannon Jones of the Eastern District of New York.  The case was investigated by the FBI and the Internal Revenue Service.

THE PROTECTION OF INVESTORS FROM FRAUDSTERS

FROM:  U.S. DEPARTMENT OF JUSTICE
Protecting Investors from Fraud
The following post appears courtesy of Barbara L. McQuade, the U.S. Attorney for the Eastern District of Michigan
Investor fraud schemes are among the most pervasive types of cases handled by the White Collar Crime Unit of the U.S. Attorney’s Office for the Eastern District of Michigan.
In the past year, our prosecutors have charged a number of investment advisors and stock brokers with defrauding their investors. In one case, a defendant encouraged elderly investors to liquidate legitimate investments to invest with him. In fact, he kept their funds for his own use, depleting many of the victims of their life savings, totaling $4 million. In another case, a defendant offered investments over the Internet, promising high returns and taking in $72 million in investor dollars. Instead, the investments either generated losses or were never made at all.

Victims of fraud include individual investors with modest portfolios as well as institutional investors with large investments, such as pension funds.

President Obama’s Financial Fraud Enforcement Task Force was designed to attack fraud, waste and abuse by increasing coordination among agencies and fully leveraging the government’s law enforcement and regulatory system. As part of that effort, the U.S. Attorney’s Office for the Eastern District of Michigan is aggressively prosecuting financial fraud cases. In the largest investment scheme in the history of the district, a defendant was recently convicted of defrauding more than 1,200 individuals by convincing them to invest more than $350 million in fictitious limited liability corporations. He was sentenced to 16 years in prison.

In addition to prosecuting perpetrators, we are also combating fraud by raising public awareness to help investors protect themselves. Knowledge of common fraud schemes can help prevent individuals from becoming victims of these crimes.

One of the most common investor fraud schemes is the classic “Ponzi” scheme, named for Charles Ponzi, who devised the concept in the 1920s. In a Ponzi scheme, the investment promoter promises investors a high rate of return for their investment and then uses the funds of new investors to pay the promised return to the earlier investors. These early investors then unwittingly help advance the scheme by bragging about the high rate of return on their investment. Eventually, of course, the scheme collapses when the swindler needs to pay out more than he can take in. A recent example of this type of fraud was the massive scheme Bernard Madoff operated that cost investors billions of dollars.

Another common scheme is known as affinity fraud. In these schemes, perpetrators prey on members of an identifiable group, such as a church community, a school parent-teacher organization, a country club or a professional group. The investment advisor will join the group, or pretend to be part of it. As a result, he enjoys an inflated credibility that encourages members of the group to trust him and be less cautious than they might otherwise be when making an investment.

Another frequently used tactic used by perpetrators of investment fraud is to ingratiate themselves with their victims. In one recent case, a defendant regularly visited his clients at home, shared details of his personal life with them, attended family functions, such as birthday parties and weddings, provided gifts to family members, made donations to the clients’ preferred charities, and assisted clients in life decisions. After obtaining their trust, he took their money for his own use.

SEC CHARGES GOLD STANDARD MINING CORP. AND OTHERS FOR FALSE AND MISLEADING STATEMENTS

FROM:  U.S. SECURITES AND EXCHANGE COMMISSION
July 3, 2012
On June 29, 2012, the Securities and Exchange Commission filed a civil action in the United States District Court for the Central District of California against Gold Standard Mining Corp. (“Gold Standard”), its Chief Executive Officer/Chief Financial Officer Panteleimon Zachos, attorney Kenneth G. Eade, auditor E. Randall Gruber and his firm Gruber & Company LLC.

In its complaint, the Commission alleges that, between May 2009 and April 2011, Gold Standard filed numerous reports about its purported Russian gold mining operations that were materially false and misleading in various respects. According to the complaint, Gold Standard represented that it had acquired a Russian gold mining company known as Ross Zoloto Co., Ltd. (“Ross Zoloto”), but did not inform investors that it had agreed to allow the prior owner of Ross Zoloto to keep profits from existing operations or of issues surrounding Russian government registration or approval of the business combination. The complaint also alleges that Gold Standard filed false or misleading financial statements.

The complaint alleges that Gold Standard and Zachos were responsible for these misstatements, and that Eade, Gruber and Gruber & Co. substantially assisted Gold Standard in making these false and misleading statements. The complaint further alleges that Gruber & Co., through its sole member Edward Randall Gruber, misrepresented in an audit opinion that it had audited the company’s 2007, 2008 and 2009 consolidated financial statements in accordance with standards of the Public Company Accounting Oversight Board.

Without admitting or denying the allegations in the Commission’s complaint, Gold Standard and Zachos consented to final judgments pursuant to which Gold Standard will be enjoined from violating Sections 10(b), 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rules 10b-5, 12b-20, 13a-11 and 13a-13 thereunder, and Zachos will be enjoined from violating Sections 10(b) and 13(b)(5) of the Exchange Act and Rules 10b-5 and 13a-14 thereunder and from aiding and abetting violations of Sections 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act and Rules 12b-20, 13a-11 and 13a-13 thereunder. Zachos will also be barred from serving as an officer or director of a public company. The judgments are subject to court approval.

The complaint alleges that Eade and Gruber aided and abetted Gold Standard’s violations of Sections 10(b) and 13(a) of the Exchange Act and Rules 10b-5(b), 12b-20, 13a-11, and 13a-13 thereunder; Gruber & Co. violated Sections 10(b) and 10A(a) of the Exchange Act and Rule 10b-5(b) thereunder, and aided and abetted the violations of Gold Standard of Sections 10(b) and 13(a) of the Exchange Act and Rules 10b-5(b), 12b-20, 13a-11, and 13a-13 thereunder; and Gruber violated Section 10A(a) of the Exchange Act and aided and abetted the violations of Gruber & Co. of Section 10(b) of the Exchange Act and Rule 10b-5(b) thereunder or, in the alternative, in liable as a control person of Gruber & Co. LLC with respect to those violations pursuant to Section 20(a) of the Exchange Act. The Commission seeks permanent injunctions, disgorgement, prejudgment interest and civil penalties against Eade, Gruber and Gruber & Co. and seeks to bar Eade from serving as an officer or director of a public company.

CFTC CHAIRMAN SUPPORTS EXEMPTIVE ORDER REGARDING DATES OF SOME DODD-FRANK PROVISIONS

FROM:  COMMODITY FUTURES TRADING COMMISSSION
Statement of Support
Chairman Gary Gensler
July 3, 2012
I support the exemptive order regarding the effective dates of certain Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) provisions.
Today’s exemptive order makes five changes to the exemptive order issued on December 19, 2011.

First, the proposed exemptive order extends the sunset date from July 16, 2012, to December 31, 2012.

Second, the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC) have now completed the rule further defining the term “swap dealer” and “securities-based swap dealer.” Thus, the exemptive order no longer provides relief as it once did until those terms were further defined.

The Commissions are also mandated by the Dodd-Frank Act to further define the term “swap” and “securities-based swap.” The staffs are making great progress, and I anticipate the Commissions will take up this final definitions rule in the near term. Until that rule is finalized, the exemptive order appropriately provides relief from the effective dates of certain Dodd-Frank provisions.

Third, in advance of the completion of the definitions rule, market participants requested clarity regarding transacting in agricultural swaps. The exemptive order allows agricultural swaps cleared through a derivatives clearing organization or traded on a designated contract market to be transacted and cleared as any other swap. This is consistent with the agricultural swaps rule the Commission already finalized, which allows farmers, ranchers, packers, processors and other end-users to manage their risk.

Fourth, unregistered trading facilities that offer swaps for trading were required under Dodd-Frank to register as swap execution facilities (SEFs) or designated contract markets (DCM) by July of this year. These facilities include exempt boards of trade, exempt commercial markets and markets excluded from regulation under section 2(d)(2). Given the Commission has yet to finalize rules on SEFs, this order gives these platforms additional time for such a transition.

Fifth, the Commission is providing guidance regarding enforcement of rules that require that certain off-exchange swap transactions only be entered into by eligible contract participants (ECPs). The guidance provides that if a person takes reasonable steps to verify that its counterparty is an ECP, but the counterparty turns out not to be an ECP based on subsequent Commission guidance, absent other material factors, the CFTC will not bring an enforcement action against the person.

SEC SUES FOR FEES CHARGED IN BREACH OF DUTY

FROM:  SECURITIES AND EXCHANGE COMMISSION
SEC Sues Fund Adviser for Fees Charged in Breach of Duty Under the Investment Company Act
Washington, D.C., June 26, 2012 — The Securities and Exchange Commission today sued AMMB Consultant Sendirian Berhad (AMC), a Malaysian investment adviser, alleging that for more than a decade, AMC charged a U.S. registered fund for advisory services that AMC did not provide. The SEC alleges that by doing so, AMC breached its fiduciary duty with respect to compensation under the Investment Company Act of 1940.

Kuala Lumpur-based AMC served as a sub-adviser to the Malaysia Fund, Inc., a closed-end fund that invests in Malaysian companies, whose principal investment adviser is Morgan Stanley Investment Management, Inc. (MSIM). The SEC alleges that AMC misrepresented its services during the fund’s annual advisory agreement review process for each year for more than 10 years, and AMC collected fees for advisory services that it did not provide.

AMC, a unit of AMMB Holdings Berhad, one of Malaysia’s largest banking groups, agreed to pay $1.6 million to settle the SEC’s charges, without admitting or denying the allegations. The case follows the SEC’s recent related action against the Malaysia Fund’s primary adviser, MSIM, and is part of an inquiry into the investment advisory contract renewal process by the SEC Enforcement Division’s Asset Management Unit.
“We are committed to ensuring that advisers to registered funds adhere to their fiduciary duty with respect to the receipt of compensation. Here, AMC breached that duty by charging fees for services that were not rendered,” said Bruce Karpati, Chief of the Asset Management Unit in the SEC’s Division of Enforcement.

AMC’s advisory fees were approved each year from 1996 to 2007 as part of the “15(c) process,” a reference to Section 15(c) of the Investment Company Act of 1940, which requires a registered fund’s board to annually evaluate the fund’s advisory agreements, and advisers to provide the board with information reasonably necessary to make that evaluation.

According to the SEC, AMC submitted a report to the Malaysia Fund’s board of directors each year that falsely claimed that AMC was providing specific advice, research, and assistance to MSIM for the benefit of the fund. In reality, the SEC’s complaint said AMC’s services were limited to providing two monthly reports based on publicly available information that MSIM did not request or use. Moreover, the SEC alleged that AMC failed to adopt and implement adequate policies, procedures, and controls over its advisory business, contrary to certifications provided to the fund’s directors in 2006 and 2007. AMC’s advisory agreement with the fund was terminated in early 2008 after the SEC’s examination staff inquired about the services AMC was purportedly providing to the fund.

The SEC’s complaint, filed in the U.S. District Court for the District of Columbia, alleges that AMC breached its fiduciary duty with respect to the receipt of compensation within the meaning of Section 36(b) of the Investment Company Act of 1940. The SEC also alleges that AMC violated Sections 206(2) and (4) of the Investment Advisers Act of 1940, and Rule 206(4)-7 thereunder, and Section 15(c) of the Investment Company Act of 1940. AMC consented to a judgment that bars it from violating these provisions in the future. AMC has also agreed to disgorge $1.3 million of its advisory fees paid by the fund and pay a $250,000 penalty.

Chad Alan Earnst, Christine Lynch, and Jessica Weiner, of the Enforcement Division’s Asset Management Unit staff, conducted the investigation along with Tonya Tullis and Edward D. McCutcheon. Karen Stevenson, Susan Schneider, and Dennis Delaney conducted the related examinations.

The SEC acknowledges the assistance of the Securities Commission of Malaysia and the Monetary Authority of Singapore.