Global Digital Solutions of West Palm Beach, FL and CEO Charged with Fraud
On August 12, 2016 the Securities and Exchange Commission (“SEC”) charged West Palm Beach-based Global Digital Solutions, former chairman and CEO Richard Sullivan, and former CFO David Loppert with defrauding investors by issuing false and misleading press releases purporting that the company was a budding leader in cyber arms manufacturing and security technology solutions.
According to the SEC’s complaint, Sullivan and Loppert were behind the press releases and corporate filings that falsified Global Digital’s operations and revenue projections when in reality it had no customers, never manufactured any cyber arms, and never provided any security technology services or solutions.
The SEC’s complaint alleges:
- Global Digital publicly announced in several press releases in October 2013 that one of its merger targets had become the exclusive original manufacturer of sophisticated grenade launchers for a major international client under a private label agreement with a first stage value of approximately $95 million.
- In November 2013, Global Digital issued a press release projecting future annual revenue of $60 million to $75 million during the first quarter of calendar year 2014.
- In March 2014, Global Digital announced in filings and press releases that it had made an unsolicited letter of intent to acquire one of the country’s largest arms manufacturers for $1.082 billion.
In fact, as alleged in the SEC’s complaint, all of these statements were false; the private label agreement announced in October 2013 did not exist, there was no basis for Global Digital’s November 2013 future annual revenue projection, and Global Digital operated out of a virtual office, had only $509,224 in cash and a $1.4 million note receivable, had no revenues or operations, lacked any credible, imminent, financing options and its offer to purchase the arms manufacturer announced in March 2014 had been immediately rejected.
The SEC’s complaint alleges that Global Digital, Sullivan and Loppert violated Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5(b) thereunder, and Section 17(a)(2) of the Securities Act of 1933. The complaint also alleges that Global Digital violated Section 13(a) of the Exchange Act and Rules 12b-20, 13a-1, and 13a-11 thereunder and that Sullivan and Loppert aided and abetted these violations. The complaint also alleges that Sullivan and Loppert violated Rule 13a-14 of the Exchange Act and Section 16(a) of the Exchange Act and Rule16a-3 thereunder. The Commission’s complaint seeks permanent injunctions and civil penalties against all defendants, disgorgement with prejudgment interest against Global Digital, and officer and director bars and penny stock bars against Sullivan and Loppert.
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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Brenda Hamilton, Securities Attorney
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