SEC Charges GenAudio and CEO With Fraudulent Stock Offerings
The Securities and Exchange Commission (SEC) filed a civil injunctive action on September 25, 2015, in the United States District Court for the District of Colorado relating to the fraudulent offer and sale of stock in GenAudio, Inc. The SEC charged GenAudio, Inc. (“GenAudio”), a Colorado corporation, its corporate successor in interest, Astound Holdings, Inc. (“Astound”), a Delaware corporation, and GenAudio’s founder and chief executive officer, Taj Jerry Mahabub, a resident of Broomfield, Colorado, with the fraudulent and unregistered offer and sale of more than $6.8 million in GenAudio stock.
According to the SEC’s complaint, from approximately March 2010 through April 2012, GenAudio raised more than $4.5 million in two private placements of its common stock based in large part on representations that Apple, Inc. (“Apple”) planned to acquire GenAudio or enter into lucrative licensing agreements to incorporate its technology across Apple’s products worldwide.
The SEC’s complaint alleges that GenAudio and Mahabub told prospective investors that Apple’s senior management advocated acquiring GenAudio’s technology, and that a third party had valued GenAudio’s technology at more than $1 billion. However, according to the SEC allegations, GenAudio had only demonstrated its technology and had technical discussions with mid-level Apple personnel, none of whom had indicated that Apple was interested in a transaction with GenAudio. The SEC further claims that during the scheme, Mahabub falsified documents and pocketed more than $2.3 million through his offer and sale of his personal stock in GenAudio.
The Complaint alleges that, based on this conduct, GenAudio and Mahabub violated Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933 (Securities Act), and Section 10(b) of the Securities Exchange Act of 1934 (Exchange Act) and Rule 10b-5 thereunder. The SEC further alleges, in the alternative, that Mahabub is liable as a control person under Section 20(a) of the Exchange Act for GenAudio’s violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and that Mahabub aided and abetted GenAudio’s violations of Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. Finally, the SEC’s complaint states that as GenAudio’s successor in interest, Astound Holdings is liable for GenAudio’s fraudulent and unregistered stock offerings. The SEC’s complaint seeks permanent injunctions, third-tier civil penalties, disgorgement plus prejudgment interest, and other relief against all of the defendants.
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 and compliance 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.
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