FROM: U.S. SECURITIES AND EXCHANGE COMMISSION
The Securities and Exchange Commission filed a civil action in the United States District Court for the Southern District of Florida against InnoVida Holdings LLC, its former CEO Claudio Osorio and its former CFO Craig Toll, CPA, charging them with defrauding investors in an offering fraud scheme. Osorio was an Ernst & Young "Entrepreneur of the Year" award winner in 1997. Separately, the U.S. Attorney's Office for the Southern District of Florida today announced criminal charges against Osorio and Toll.
The Commission's complaint alleges that from at least 2007 to April 2010, InnoVida, Osorio and Toll perpetrated an offering fraud that raised at least $16.8 million mainly from investors located in Miami, Florida. According to the SEC's complaint, InnoVida, a manufacturer of alternative housing structures, claimed that its product was fire and hurricane proof and could be produced at economically advantageous prices. The SEC's complaint alleges that Osorio used fraudulent pro forma financial statements to persuade investors to fund InnoVida's alternative housing business. According to the complaint, Toll prepared the pro formas, which falsely reflected that InnoVida had more than $35 million in cash and cash equivalents in its bank accounts, and more than $100 million in equity.
The complaint also alleges that Osorio lied to investors when he told them that he had personally invested tens of millions of his own money into InnoVida, that InnoVida was valued at as high as $250 million, and that a third-party was about to make a substantial investment in InnoVida that would benefit current investors. Further, the complaint alleges that Osorio diverted at least $8.1 million of investor monies to fund his lavish lifestyle. According to the complaint, Osorio was active in local and national fundraising and was able to recruit a high-profile board of directors for InnoVida.
The SEC's complaint charges the defendants with violating 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. The SEC's complaint, seeks disgorgement of ill-gotten gains, financial penalties, and injunctive relief against InnoVida, Osorio and Toll to enjoin them from future violations of the federal securities laws. The complaint also seeks an order barring Osorio and Toll from serving as an officer or director of a public company.
The SEC's investigation was conducted in the Miami Regional Office by Senior Investigations Counsel Gary M. Miller and Accountant Karaz S. Zaki under the supervision of Assistant Regional Director Elisha L. Frank. Amie Riggle Berlin will lead the SEC's litigation. The SEC acknowledges the assistance and cooperation of the U.S. Attorney's Office for the Southern District of Florida, and the Federal Bureau of Investigation, Miami Division in investigating this matter.
FROM: U.S. SECURITIES AND EXCHANGE COMMISSION
The Securities and Exchange Commission announced today that on October 18, 2012, the Honorable Sandra J. Feuerstein of the U.S. District Court for the Eastern District of New York entered a final judgment against two brothers, Mayer Amsel and David Amsel, following a bench trial in a market manipulation case involving the securities of a company known as East Delta Resources Corp.
The final judgment orders the Amsels to pay, on a joint and several basis, $936,780.46 in disgorgement and $326,631.17 in prejudgment interest. In addition, Mayer Amsel was ordered to pay a civil money penalty of $455,000, and David Amsel was ordered to pay a civil money penalty of $715,000.
Besides monetary remedies, the judgment also provides injunctive relief. The Amsels were permanently enjoined from violating Section 10(b) of the Securities Exchange Act of 1934; Exchange Act Rule 10b-5; and Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933. The judgment likewise permanently enjoins both men from participating in any offering of penny stock and any activities to induce the purchase or sale of any penny stock. David Amsel was permanently enjoined from aiding and abetting violations of Section 13(a) of the Exchange Act and Exchange Act Rules 12b-20, 13a-1, and 13a-13. David Amsel was also enjoined from serving as an officer or director of a publicly held company for eight years from September 7, 2012.
The SEC charged the Amsels in January 2010, alleging that together they garnered more than $1 million in illegal profits when they conducted unlawful wash sales and matched sales of unregistered East Delta shares. All of the SEC’s claims against the Amsels were resolved in the SEC’s favor via summary judgment, at trial, or through two post-trial rulings. All of the findings in the court’s summary judgment ruling and post-trial rulings were incorporated into the final judgment.
The court found on summary judgment that the Amsels violated Section 10(b) of the Exchange Act and Section 17(a) of the Securities Act when they executed fraudulent wash sales and matched sales, and that David Amsel aided and abetted East Delta’s violation of Section 13(a) of the Exchange Act when he prepared certain SEC filings for East Delta. Based upon the evidence presented at trial, the court found that both Amsels also violated Sections 5(a) and 5(c) of the Securities Act by selling unregistered East Delta shares, notwithstanding the existence of a Form S-8 registration statement and consulting agreement associated with Mayer Amsel’s stock. Significantly, the court found the Form S-8 ineffective for registration purposes because the "primary character" of Mayer Amsel’s consulting role at East Delta was capital-raising and promotional and thus contrary to the eligibility requirements for effective Form S-8 registration.
The SEC’s case was litigated by Frederick Block, Assistant Chief Litigation Counsel and Danette Edwards, Senior Counsel. The investigation prior to the litigation was led by Stephen Herm, David Neuman, Senior Investigations Counsel, and Gregory Faragasso, Assistant Director.
The SEC appreciates the assistance of the Quebec Autorité des marchés financiers (AMF) and the British Columbia Securities Commission (BCSC) in connection with the investigation leading to the litigation.
FROM: U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C., Dec. 7, 2012 — The Securities and Exchange Commission today announced charges against a Florida-based securities lawyer for issuing fraudulent attorney opinion letters that resulted in more than 70 million shares of microcap stock becoming available for unrestricted trading by investors.
An attorney opinion letter is required from a licensed and duly authorized securities lawyer in order to facilitate the transfer of restricted microcap shares on the over-the-counter markets. In April 2010, the Pink Sheets (now OTC Markets Group) banned Guy M. Jean-Pierre of Pompano Beach, Fla., from issuing attorney opinion letters due to "repeated missing information and inconsistencies" about the issuers and his lack of due diligence in his past letters.
The SEC alleges that Jean-Pierre has since engaged in a scheme to continue writing and issuing attorney opinion letters in the name of his niece by applying her signature without her consent. Jean-Pierre (also known as Marcelo Dominguez de Guerra) sought to evade the ban by forming a new company called Complete Legal Solutions and misrepresenting that his niece was conducting the legal work that was allegedly performed.
"Securities lawyers are trusted gatekeepers in the issuance of stock, and it is particularly offensive when attorneys like Jean-Pierre blatantly break the rules and commit fraud," said Andrew M. Calamari, Director of the SEC’s New York Regional Office. "The SEC is committed to punishing offenders like Jean-Pierre as we continue to root out the enablers of microcap fraud in our markets."
According to the SEC’s complaint filed late yesterday in U.S. District Court for the Southern District of New York, Jean-Pierre hatched a plan within two weeks of his ban to continue issuing attorney opinion letters through Complete Legal and his niece’s identity. Jean-Pierre’s niece, a licensed attorney herself, was looking for work at the time. Jean-Pierre told his niece about his work issuing attorney opinion letters and offered to pay her to assist him. He suggested they form Complete Legal and asked her to send him three copies of her signature and a copy of her driver’s license. Jean-Pierre’s niece complied with his requests with the understanding this information was needed to incorporate Complete Legal. Afterwards, Jean-Pierre never requested that his niece do any legal work at Complete Legal and she was not compensated for any such work.
Instead, the SEC alleges that Jean-Pierre used the new company and his niece’s identity to continue his prior practice of issuing attorney opinion letters. Each of these letters contained fraudulent statements and falsely represented his niece as the signatory. Jean-Pierre’s niece did not write any of the letters and did not make the representations concerning the issuers. Jean-Pierre fabricated attorney opinion letters on Complete Legal letterhead for at least 11 companies that traded publicly on the Pink Sheets. Certain letters resulted in Pink Sheet issuers being granted the improved status of having adequate current information in the public domain under Rule 144(c)(2) of the Securities Act of 1933. This status kept the issuers from being tagged on the Pink Sheets’ website with a red "STOP" sign near its ticker symbol with the moniker of "OTC Pink No Information" and a large warning that the company "may not be making material information publicly available."
According to the SEC’s complaint, adequate current public information about an issuer must be available for certain selling security holders to comply with the Rule 144 safe harbor allowing companies to issue unregistered securities pursuant to Section 4(1) of the Securities Act. Jean-Pierre falsely issued letters bearing his niece’s signature to transfer agents opining that restrictive legends could be legally removed from either pre-existing stock certificates or newly issued stock certificates pursuant to Rules 144 or 504 of the Securities Act.
The SEC’s complaint alleges that Jean-Pierre violated Section 17(a) of the Securities Act and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5. The SEC is seeking disgorgement of ill-gotten gains with prejudgment interest and financial penalties, a permanent injunction, and a bar from participating in the offering of any penny stock pursuant to Section 20(g) of the Securities Act.
The SEC’s investigation, which is continuing, has been conducted by Megan Genet and Steven G. Rawlings in the New York Regional Office. Todd Brody, Barry Kamar, and Ms. Genet are handling the SEC’s litigation.
FROM: U.S. COMMODITY FUTURES TRADING COMMISSION
Federal Court in New York Orders Defendants Forex Capital Trading Group, Forex Capital Trading Partners, and Highland Stone Capital Management to Pay over $1.8 Million for Fraud in Off-Exchange Foreign Currency Scheme
Court order permanently bars defendants from the commodities industry
Washington, DC - The U.S. Commodity Futures Trading Commission (CFTC) today announced that Judge Katherine B. Forrest of the U.S. District Court for the Southern District of New York entered a default judgment and permanent injunction order against defendants Forex Capital Trading Group, Inc. (Forex Group), Forex Capital Trading Partners, Inc. (Forex Partners), both of New York, N.Y., and Highland Stone Capital Management, L.L.C. (Highland Stone) of Rutherford, N.J. The order requires these defendants to pay a civil monetary penalty of $1,352,293 and to disgorge $450,764 of ill-gotten gains for the benefit of defrauded customers. The order also imposes permanent trading and registration bans against the defendants and prohibits them from violating the Commodity Exchange Act and CFTC regulations, as charged.
The order stems from a CFTC anti-fraud enforcement action filed on July 27, 2011 against these three companies and their principals (see CFTC Press Release 6083-11, July 28, 2011). The order finds that Forex Group, Forex Partners, and Highland Stone fraudulently solicited 106 customers who invested more than $2.8 million to trade retail foreign currency (forex). In soliciting customers, the defendants falsely claimed, on their websites and elsewhere, that their forex trading for customers was profitable for a period of several years, the order finds. The defendants’ claims included a falsely reported customer gain of 51.94 percent in 2010, a year, in fact, in which their customers lost more than $1.2 million. Overall, customers lost more than 93 percent of their total invested principal through the defendants’ forex trading, the order finds.
The order also finds that the defendants distributed false account statements to prospective customers showing profitable trading and acted in capacities requiring registration with the CFTC, but were not registered.
The CFTC’s litigation is continuing against the principals of Forex Partners and Forex Group, namely Susan G. Davis of Jersey City, N.J., and David E. Howard II, of New York, N.Y., and against the principal of Highland Stone, Joseph Burgos, of Rutherford, N.J.
The CFTC appreciates the assistance of the U.K. Financial Services Authority in this matter.
CFTC Division of Enforcement staff members responsible for this action are Susan B. Padove, Joy McCormack, Elizabeth Streit, Michael Geiser, Janine Gargiulo, Scott Williamson, Rosemary Hollinger, and Richard B. Wagner.
FROM: U.S. SECURITIES AND EXCHANGE COMMISSION
December 4, 2012
Defendant in SEC Action Pleads Guilty to Criminal Charges and is Barred from the Securities Industry
the Securities and Exchange Commission announced today that Arnett L. Waters of Milton, Massachusetts, a principal of a broker-dealer and investment adviser who is a defendant in a securities fraud action filed by the Commission in May 2012, has pleaded guilty to criminal charges brought by the U.S. Attorney for the District of Massachusetts and has been barred from the securities industry by the Commission. Waters' guilty plea to securities fraud and other charges occurred on November 29, 2012, and follows an earlier guilty plea by Waters in October 2012 to criminal contempt charges for violating a preliminary injunction order obtained by the Commission in its case. The Commission's Order barring Waters from the securities industry was issued on December 3, 2012.
The Commission filed an emergency enforcement action against Waters on May 1, 2012, alleging that he and two companies under his control, broker-dealer A.L. Waters Capital, LLC and investment adviser Moneta Management, LLC, defrauded investors from at least 2009-2012 by, among other things, misappropriating investor funds and spending it on personal expenses. On May 3, 2012, the Court entered a preliminary injunction order that, among other things, froze Waters' assets and required him to provide an accounting of all his assets to the Commission. On August 7, 2012, the Commission filed a civil contempt motion against Waters, alleging that he had violated the court's preliminary injunction order by establishing an undisclosed bank account, transferring funds to that account, dissipating assets, and failing to disclose the bank account to the Commission, as required by the Court's order. On August 9, 2012, the U.S. Attorney for the District of Massachusetts filed a separate criminal contempt action against Waters based on the same allegations. On October 2, 2012, Waters pleaded guilty to the criminal contempt charges, and the Court ordered him detained pending sentencing.
The Commission's Order barring Waters from the securities industry was issued on December 3, 2012, and is based on his October 2, 2012 guilty plea to criminal contempt charges. The Order bars Waters from association with any broker, dealer, investment adviser, municipal securities dealer, municipal advisor, transfer agent, or nationally recognized statistical rating organization, and from participating in any offering of a penny stock, including: acting as a promoter, finder, consultant, agent or other person who engages in activities with a broker, dealer or issuer for purposes of the issuance or trading in any penny stock, or inducing or attempting to induce the purchase or sale of any penny stock.
The U.S. Attorney for the District of Massachusetts also charged Waters with a broader array of securities fraud and other violations on October 17, 2012. On November 29, 2012, Waters pleaded guilty to sixteen counts of securities fraud, mail fraud, money laundering, and obstruction of justice. The counts of the criminal information to which Waters pleaded guilty alleged that, from at least 2007 through 2012, he used fictitious investment-related partnerships to draw in investors, misappropriate their investment money, and spend the vast majority of it on personal and business expenses and debts. Waters raised at least $839,000 from at least thirteen investors, including $500,000 from his church in March 2012. Waters also pleaded guilty to engaging in a criminal scheme to defraud clients of his rare coin business. Under this scheme, Waters defrauded coin customers out of as much as $7.8 million by selling coins at prices inflated, on average, by 600% and by inducing coin purchasers to return coins to him, on the false representation that he would sell those coins on the customers' behalf, when, in fact, he sold most or all of the coins and kept the proceeds for himself. The criminal information to which Waters pleaded guilty further alleged that he engaged in money laundering through two transactions totaling $77,000. Finally, Waters pleaded guilty to allegations that he made multiple misrepresentations to Commission staff, including that there were no investors in his investment-related partnerships, in order to conceal the fact that investor money was misappropriated in a fraudulent scheme. Waters is charged with obstruction of justice related to this conduct.
Waters has been detained since October 2, 2012, when the Court ordered him held pending sentencing in the criminal contempt action. He is currently scheduled to be sentenced in April 2013 in connection with the guilty pleas in the two separate criminal actions against him.
Posts
