SEC CHARGES SALES EXEC. FOR ROLE IN FINANCIAL FRAUD INVOLVING CANADIAN ENERGY SERVICES BUSINESS

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 23191 / February 6, 2015

Securities and Exchange Commission v. Joseph A. Kostelecky, Civil Action No. 1:15-cv-00017-CSM (D.N.D.)

SEC Charges Sales Executive in North Dakota for Enabling Financial Fraud

The Securities and Exchange Commission today charged a former senior sales executive living in North Dakota for his role in a financial fraud that occurred at a Canadian oil-and-gas services company Poseidon Concepts Corp.

The SEC alleges that Joseph A. Kostelecky, who was the company's only senior executive in the U.S., was among those responsible for Poseidon's fraudulent reporting of approximately $100 million in revenues for contracts that were either non-existent or uncollectable. Poseidon's business in the U.S. was focused on renting above-ground fluid storage tanks for oil-and-gas hydraulic fracturing operations. According to the SEC's complaint filed in federal court in North Dakota, Kostelecky directed Poseidon's accounting staff to record revenues for inadequately documented transactions and made false assurances to several members of Poseidon's management in Canada that transactions with U.S. customers were valid and collectible. Poseidon consequently issued three quarterly financial statements from January to November 2012 with materially inflated revenues while its stock was trading in the U.S. and Canada. The magnitude of the overstatements was substantial, comprising approximately 64 to 72 percent of total revenues reported over the first three fiscal quarters of 2012.

When Poseidon later announced publicly that it would need to restate its financials due to the inflated revenues, its stock price collapsed and the company eventually filed for bankruptcy. Poseidon was based in Calgary and operated a subsidiary with offices in Denver and Dickinson, N.D., where Kostelecky still resides.

Kostelecky agreed to settle the SEC's charges by paying a $75,000 penalty and being barred from serving as an officer or director of a U.S. publicly-traded company. Without admitting or denying the SEC's allegations, Kostelecky consented to a final judgment enjoining him from violations of Sections 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5. The SEC's action against Kostelecky was filed in conjunction with an enforcement proceeding by the Alberta Securities Commission against Poseidon's senior management, including Kostelecky.

The SEC's investigation was conducted by Lee Robinson, Donna Walker, and Ian Karpel in the Denver Regional Office. The SEC appreciates the assistance of the Alberta Securities Commission.

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HEDGE FUND MANAGER HAS EMERGENCY ENFORCEMENT ACTION FILED AGAINST HIM BY SEC

Litigation Release No. 23197 / February 13, 2015
Securities and Exchange Commission v. Mozzam "Mark" Malik and American Bridge Investment Group, LLC, d/b/a Wolf Hedge LLC, Civil Action No. 15-1025 (RJS)
SEC Charges Hedge Fund Manager Mark Malik With Stealing Investor Funds

The Securities and Exchange Commission filed an emergency enforcement action to halt an ongoing fraud by Moazzam "Mark" Malik, a Pakistani citizen and New York City resident. The SEC charged Malik and his hedge fund with stealing money from his investors.

The SEC alleges that Moazzam "Mark" Malik falsely claimed to be operating a hedge fund with approximately $100 million in assets under management, and he solicited investors with promises of consistently high returns. Although he raised $840,774 from investors, his fund never made real investments and never held more than $90,177 in assets as Malik continually withdrew the cash and spent it as his own. Despite repeated demands from investors for the return of their money, Malik has flatly refused or delayed the bulk of their redemption requests. He allegedly went so far as to create a fictitious fund employee who sent one investor an e-mail claiming that Malik had died.

According to the SEC's complaint filed in U.S. District Court for the Southern District of New York, Malik has been continuing to solicit investors amid the redemption requests. His fund has changed its name several times since he created it in 2010. Malik initially called it Wall Street Creative Partners before changing it to Seven Sages Capital LP and then American Bridge Investment Group LLC. Most recently it has been known as Wolf Hedge LLC. Malik described his fund as "a privately held Global Investment Management firm dedicated to the individuals and institutions around the world."

The SEC alleges that Malik created a fictitious "Amanda Ebert" who was identified with a title of "Investor Relations, Wolf Hedge LLC" in e-mail communications with several investors. Malik included in the e-mails a purported photograph of Ebert that he copied off the Internet. The real-life woman in the photo does not know Malik and never authorized the use of her image in the e-mails.

The SEC's complaint charges Malik and American Bridge with violating 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 charges Malik with violations of Sections 206(1), 206(2) and 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-8 thereunder. The SEC is seeking a temporary restraining order to freeze their assets and prohibit them from committing further violations of the federal securities laws. The SEC seeks a final judgment ordering them to disgorge their ill-gotten gains plus prejudgment interest and pay financial penalties.

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