Founder of iShopNoMarkup Found Guilty
On October 14, 2014, a jury in federal court in Central Islip, New York returned a verdict in favor of the Securities and Exchange Commission (the “SEC”) finding the former Chairman of failed Long Island-based internet startup, iShopNoMarkup.com, Inc., liable for securities fraud and illegally selling unregistered securities.
The defendant, Anthony Knight co-founded iShopNoMarkup, and was formerly the Chairman of iShopNoMarkup’s Board of Directors.
He also served at various times as the Secretary and Chief Executive Officer of iShopNoMarkup. The SEC had charged that from the fall of 1999 until the summer of 2000, iShopNoMarkup, Knight and others conducted a fraudulent securities offering scheme that defrauded over 350 investors who invested approximately $2.3 million. iShopNoMarkup also failed to file any registration statement with the SEC as to the securities sold.
United States District Judge Denis R. Hurley, who presided over the trial, will determine the remedies and sanctions to be imposed against the defendant. The Commission is seeking a judgment requiring the defendant to pay disgorgement of ill-gotten gains plus prejudgment interest, as well as civil monetary penalties, an injunction, and an officer and director bar.
The SEC charged that from the fall of 1999 until the summer of 2000, iShopNoMarkup conducted a fraudulent and unregistered securities offering. iShopNoMarkup distributed offering memoranda and other documents to investors that misrepresented, and failed to disclose, material information concerning iShopNoMarkup’s business operations. Knight and others also made oral misrepresentations to investors to persuade them to invest in iShopNoMarkup stock. Knight also supervised Scott W. Brockop, iShopNoMarkup’s former Vice President of Sales and Marketing, who oversaw an operation at iShopNoMarkup through which employees cold-called potential investors, and made material misrepresentations to induce them to purchase iShopNoMarkup stock. Through the offering, iShopNoMarkup sold nearly 6.75 million shares of stock to over 350 investors, and obtained proceeds of approximately $2.3 million. iShopNoMarkup did not file a registration statement for the sale of these securities, and there was no registration statement otherwise in effect.
The SEC also charged iShopNoMarkup, Brockop, and Moussa Yeroushalmi a/k/a Mike Yeroush, iShopNoMarkup’s former President. On October 26, 2006, the District Court entered a final judgment by default against Brockop, and on February 15, 2007, a Commission administrative law judge entered an order by default against Brockop barring him from association with any broker or dealer. On January 21, 2011, the District Court entered a final judgment by consent against Yeroush. On April 30, 2014, the District Court entered a final judgment by consent against iShopNoMarkup, leaving Knight as the sole remaining defendant in the litigation.
The jury found that defendant Knight violated Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934, and Rule 10b-5 thereunder. Judge Hurley will make the determination as to the final relief that should be imposed against the defendant. The Commission seeks an order permanently enjoining the defendant from violations of the above provisions of the federal securities laws, requiring disgorgement of ill-gotten gains, plus prejudgment interest thereon, and imposing civil penalties pursuant to Section 20(d) of the Securities Act and Section 21(d)(3) of the Exchange Act. The Commission also seeks an order barring the defendant from acting as an officer or director of a public company under Section 21(d)(2) of the Exchange Act.
For further information about this securities law blog post, please contact Brenda Hamilton, Securities Attorney at 101 Plaza Real S, Suite 202 N, Boca Raton, Florida, (561) 416-8956, by email at [email protected] or visit www.securitieslawyer101.com. This securities law blog post is provided as a general informational service to clients and friends of Hamilton & Associates Law Group and should not be construed as, and does not constitute legal advice on any specific matter, nor does this message create an attorney-client relationship. Please note that the prior results discussed herein do not guarantee similar outcomes.