Securities and Going Public Blog

Jury Verdict in SEC’s Favor Against Biopharmaceutical Company CEO Stephen Ferrone

The SEC announced on May 3rd, 2016, a jury in federal district court in Chicago, Illinois returned a verdict against Stephen Ferrone, the former CEO of biopharmaceutical company Immunosyn Corporation, finding him liable for violating the anti fraud provisions of the federal securities laws.

Ferrone and other defendants were charged in August 2011, alleging, among other things, that Ferrone made materially false and misleading statements during 2007-2010 regarding the status of regulatory approvals for Immunosyn’s sole product, a drug referred to as “SF-1019.” The SEC’s complaint alleged that Ferrone falsely stated in public filings with the SEC and in other presentations that Argyll Biotechnologies, LLC, Immunosyn’s controlling shareholder, planned to commence the regulatory approval process for human clinical trials for SF-1019 in the U.S. or that the regulatory approval process was underway. The complaint alleged that these statements deceived investors because the statements failed to disclose that the U.S. Food and Drug Administration had issued clinical holds on drug applications for SF-1019, which prohibited clinical trials involving SF-1019 from occurring.

After a two-week trial, the jury found Ferrone liable for violating Section 10(b) of the Securities Exchange Act of 1934 and Exchange Act Rule 10b-5 thereunder, and Exchange Act Rule 13a-14. The jury found Ferrone not liable for aiding and abetting Immunosyn’s failure to file annual, quarterly, and current reports that were accurate and not materially misleading under Exchange Act Section 20.

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 info@securitieslawyer101.com 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.

Hamilton & Associates | Securities Lawyers
Brenda Hamilton, Securities Attorney
101 Plaza Real South, Suite 202 North
Boca Raton, Florida 33432
Telephone: (561) 416-8956
Facsimile: (561) 416-2855

Trader Agrees to Settle Claims Relating to Hacked News Release Scheme-Recovery exceeds $52 Million

Ponzi Scheme AttorneysThe SEC announced on May 4th, 2016 that it had entered into a settlement agreement, subject to court approval, with defendant Oleksandr Makarov in a case alleging a scheme to trade on hacked news releases. In August 2015, the Commission filed a civil action and then an amended complaint in federal court in New Jersey, and the court entered an asset freeze and other emergency relief against Makarov, among others.

The amended complaint alleges that Makarov made approximately $80,000 buying and selling stock on the basis of hacked press releases stolen from two news wire services between 2012 and 2014, and made additional profits trading on press releases stolen from a third news wire service in 2015.

Without admitting or denying the allegations in the complaint, Makarov agreed to be permanently enjoined from violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 there under and Section 17(a) of the Securities Act of 1933 and pay disgorgement of $100,000.

The SEC has now recovered over $52 million and obtained full injunctive relief from the 11 defendants who have agreed to settlements in this case. In addition to the settlement announced on May 4th, 2016, the settlements thus far include:

In March 2016, the SEC also filed a related complaint charging nine additional defendants for taking part in the hacking scheme. Combined, these additional defendants reaped over $19.5 of the more than $100 million in illicit trading profits generated by the perpetrators of this scheme.

The Commission’s litigation continues against the remaining defendants charged in the case.

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 info@securitieslawyer101.com 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.

Hamilton & Associates | Securities Lawyers
Brenda Hamilton, Securities Attorney
101 Plaza Real South, Suite 202 North
Boca Raton, Florida 33432
Telephone: (561) 416-8956
Facsimile: (561) 416-2855

SEC Charges Asher Z. Zwebner for Conducting a Phony IPO

Kickback-Scheme-300x200The Securities and Exchange Commission (SEC) on April 26th, 2016 announced fraud charges against Israeli Asher Z. Zwebner for engaging in a scheme to create a publicly-traded shell company, Crown Dynamics Corp., through a sham registered initial public offering. In a separate case, the SEC announced fraud charges against five U.S. residents – California resident Luke C. Zouvas and Arizona residents Cameron F. Robb, Christopher D. Larson, Jason M. Schiprett, and Robert D. Jorgenson – for engaging in a “pump-and-dump” scheme to manipulate the market for the stock of Crown. Both actions were filed in the U.S. District Court for the Southern District of California.

According to the SEC’s complaint against Zwebner, filed today in federal court, Zwebner secretly controlled every aspect of Crown’s registration and the IPO. He filed a false Form S-1 registration statement with the SEC on behalf of the company, and after the registration became effective, placed Crown’s free-trading shares with nominees residing in Israel, most of whom were unaware of their role as nominees. Zwebner then gained physical control of their stock certificates. He subsequently engaged a U.S. broker-dealer to submit to the Financial Industry Regulatory Authority (FINRA) a false Form 15c2-11 under Rule 15c2-11 of the Securities Exchange Act of 1934, so that Crown’s common stock would be quoted on the Over-the-Counter Bulletin Board (OTCBB) and the OTC Link (an SEC-registered Alternative Trading System). Throughout the registration process, Zwebner did not disclose his control over Crown, made false statements about Crown’s business purpose and plans, and used unwitting nominees as the purported IPO purchasers. After Zwebner registered Crown’s offering and arranged for its stock to trade on the OTCBB and on OTC Link, he secretly sold the Crown shell to stock promoter Larson.

According to the SEC’s complaint against Zouvas, Robb, Larson, Schiprett and Jorgenson, filed on April 25, 2016 in federal court, Larson obtained controlling shares of Crown from Zwebner and, although Larson controlled Crown and acted as its de facto chief financial officer, his name did not appear in any of Crown’s filings with the SEC. With the assistance of Luke C. Zouvas, an attorney based in San Diego who served as Crown’s general counsel, Larson transferred free-trading Crown shares from Zwebner’s nominees – purported shareholders in Crown’s IPO – to Larson’s nominees, including Jorgenson and Schiprett. Larson then paid $400,000 for a “call center” to promote Crown and placed manipulative trades in his own brokerage account to create the appearance of market interest in the stock. Robb prepared materially misleading press releases about the company’s business success. As Crown’s stock price became inflated as a result of Larson’s and Robb’s efforts to pump the stock, Larson’s nominees Jorgenson and Schiprett sold Crown shares and wired most of the sale proceeds – at least $865,000 – to accounts controlled by Larson. Jorgenson and Schiprett retained some of the proceeds as compensation for their assistance in the scheme as nominees.

The SEC’s complaint against Zwebner charges him with violations of Section 17(a)(1), (2) and (3) of the Securities Act of 1933 and Section 10(b) and Rule 10b-5(a), (b) and (c) of the Securities Exchange Act of 1934. The SEC seeks a permanent injunction, disgorgement of ill-gotten gains with interest, a civil penalty, and a penny stock bar and officer and director bar against Zwebner.

The SEC’s complaint against Zouvas, Robb, Larson, Schiprett and Jorgenson charges each of them with violations of Section 17(a)(1) and (3) of the Securities Act and Section 10(b) and Rule 10b-5(a) and (c) of the Exchange Act. The SEC seeks a permanent injunction, disgorgement of ill-gotten gains with interest, civil penalties, and a penny stock bar against all defendants, and an officer and director bar against Larson and Robb.

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 info@securitieslawyer101.com 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.

Hamilton & Associates | Securities Lawyers
Brenda Hamilton, Securities Attorney
101 Plaza Real South, Suite 202 North
Boca Raton, Florida 33432
Telephone: (561) 416-8956
Facsimile: (561) 416-2855

SEC v. George A. Moore III, et al.,

Forensic Attorneys

The Securities and Exchange Commission (SEC) charged George A. Moore III of Durham, North Carolina, the former CEO of Solarbrook Water and Power Corporation, and Joseph R. DeRosa of Cornelius, North Carolina with violating the antifraud and offering registration provisions of the federal securities laws on May 3rd, 2016.

According to the SEC’s complaint, Moore and Joseph DeRosa caused Solarbrook to issue more than 10 million restricted shares of Solarbrook common stock to Lisa DeRosa pursuant to a falsified consulting agreement and a backdated convertible debenture. The SEC’s complaint further alleges that Joseph DeRosa forged an attorney opinion letter that he submitted to Solarbrook’s transfer agent together with falsified Solarbrook documents created and provided by Moore, in a successful effort to deceive the transfer agent into removing the restrictive legend on the Solarbrook shares that had been issued to Lisa DeRosa of Cornelius, North Carolina.Joseph DeRosa subsequently submitted those and other falsified documents to two broker-dealers in an ultimately successful scheme to sell the unregistered shares into the public marketplace.

The SEC’s complaint alleges that Moore and Joseph DeRosa violated 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.Lisa DeRosa is named as a relief defendant for the purposes of recovering profits from the sale of Solarbrook shares.

Without admitting or denying the allegations in the SEC’s complaint, Moore and Joseph DeRosa have consented to the entry of judgments permanently enjoining each of them from violating Sections 5 and 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder and barring each of them from participating in penny stock offerings.The judgment against Moore also will bar him from serving as an officer or director of any public company.The judgments against Joseph DeRosa and Lisa DeRosa will order them to pay, jointly and severally, disgorgement and prejudgment interest in the amount of $30,570.The judgment against Joseph DeRosa will order him to pay a civil penalty in the amount of $26,175.The settlements are subject to approval by the Court.

Separately, the Commission today issued an Order of Suspension of Trading in the securities of Solarbrook (ticker symbol:SLRW).Solarbrook was administratively dissolved by the State of North Carolina in 2012.

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 info@securitieslawyer101.com 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.

Hamilton & Associates | Securities Lawyers
Brenda Hamilton, Securities Attorney
101 Plaza Real South, Suite 202 North
Boca Raton, Florida 33432
Telephone: (561) 416-8956
Facsimile: (561) 416-2855

 

Court Enters Permanent Officer and Director Bar Against Former CFO of Terex Corporation

Oil & Gas Boiler Room

On May 5, 2016, Judge Alvin W. Thompson of the U.S. District Court for the District of Connecticut granted the SEC’s motion for an officer and director bar against Joseph F. Apuzzo, former Chief Financial Officer of Terex Corporation. The ruling follows an evidentiary hearing on the Commission’s motion and resolves the case against Apuzzo in its entirety. Apuzzo had previously consented, without admitting or denying the allegations in the Commission’s complaint, to be permanently enjoined from violations of Sections 10(b) and 13(b)(5) of the Securities and Exchange Act of 1934 (“Exchange Act”) and Rules 10b-5 and 13b2-1 thereunder, and from aiding and abetting violation of Sections 13(a) and 13(b)(2)(A) of the Exchange Act and Rule 13a-1 thereunder, and to pay a penalty of $100,000. Read More

The SEC Charges Richard St. Julien and 10 Others

 Insider Trading Attorney

The SEC announced  fraud charges against 10 individuals involved in schemes to trick investors into buying shares of a particular company stock on May 3rd, 2016.

The schemes were allegedly fraught with cash bribes and other kickbacks to registered representatives and unregistered brokers who solicited investors to buy stock in ForceField Energy Inc. The SEC alleges that investors were unaware those soliciting them were being paid by a ringleader – ForceField’s then-chairman of the board Richard St. Julien – to steer them to the stock, and that some of the perpetrators attempted to evade law enforcement by going so far as to communicate with prepaid disposable “burner” phones and encrypted, content-expiring text messages. Read More

IHUB Pushes Back to COR Clearing Subpoena in Calissio Case

We last wrote about the complex litigation involving Calissio Resources Group (CRGP) in February. It arose out of a controversy surrounding the company’s payment of a special dividend of $0.011 a share in August 2015. At the time of declaration, Calissio estimated that the dividend would cost about $1.3 million. During the same period, it announced that it would launch a stock buyback program.

We last wrote about the complex litigation involving Calissio Resources Group (CRGP) in February.  It arose out of a controversy surrounding the company’s payment of a special dividend of $0.011 a share in August 2015.  At the time of declaration, Calissio estimated that the dividend would cost about $1.3 million.  During the same period, it announced that it would launch a stock buyback program.

The dividend was declared on 16 June.  The company set a record date of 30 June and a pay date of 17 August.  When FINRA processed the relative corporate action request, it named 19 June as the ex dividend date.  The ex date is the first day on which a stock will trade without a dividend attached.  The dividend will be paid on all stock of the class specified that is issued and outstanding as of the record date.  If a shareholder sells his stock between the record and ex dates—that is, during the interim period—he will be selling his right to the dividend with it.  A due bill will be attached, and the dividend will be paid to the person holding the stock as of the ex date.  To sum up:  the record date establishes what stock is eligible for the dividend; the ex date establishes what shareholders will receive it. Read More

Operation Bermuda Short In Retrospect

Securities Lawyer 101 - William David JonesMany penny stocks have bad histories, or are associated with questionable players.  Only last December, convicted felon Edward Durante was civilly and criminally charged in a securities fraud and manipulation scheme he’d embarked upon immediately after leaving prison in 2009.  He managed to escape detection for years by using a number of aliases and variations of his name.  One-time bad actors don’t always go that far, though they almost always attempt to conceal their unsavory pasts.

A case in point is William David Jones.  Jones currently works with Kaya Holdings, Inc (KAYS) as a “consultant.”  Between 2010 and April 2015, KAYS was Alternative Fuels America, Inc (AFAI), a biofuels company hoping to score in the then-hot alternative energy industry.  Despite the efforts of its CEO Craig Frank, that didn’t happen, so in 2014 Frank decided to take the company in a new direction.  The following year, KAYS changed its name and ticker, claiming to be the “first publicly traded seed-to-sale marijuana business.”  Frank chose to establish his operation in Oregon, which had recently legalized recreational as well as medical marijuana.  KAYS is by no means the first public pot company—there are at least 300 public entities that deal in marijuana or peripherals like grow equipment or vapes—but it’s one of approximately 50 that are Securities and Exchange Commission (“SEC”) registrants.  Currently, KAYS has two dispensaries in Oregon, one in Portland, the other in Salem.  They’re branded as “Kaya Shacks.” Read More

Court Enters Final Judgments in Sky Capital Boiler Room Case

Sky Capital - Final Consent JudgmentsThe Securities and Exchange Commission (“SEC”) announced that on April 8th the Honorable Paul A. Crotty of the United States District Court for the Southern District of New York entered final judgments on consent against defendants Stephen Shea, the former Chief Operating Officer of Sky Capital LLC a/k/a Granta Capital Group LLC (“Sky Capital”), and three registered representatives (“RRs”) at Sky Capital, Adam Harrington Ruckdeschel, Michael Passaro, and Robert Grabowski, permanently enjoining them from violating the antifraud provisions of the federal securities laws. These judgments fully resolve the enforcement action before Judge Crotty as to these defendants.

In its complaint filed on July 8, 2009, the SEC alleged that Shea, Harrington, Passaro, and Grabowski used fraudulent boiler room tactics to raise more than $61 million from investors in two related companies – Sky Capital Holdings Ltd. and Sky Capital Enterprises, Inc. (the “Sky Entities”). The complaint alleged that the defendants orchestrated and participated in the extremely profitable scheme designed to fraudulently induce numerous individuals to invest in the Sky Entities. Read More

Court Sentences Michael Donnelly to 99 Months Imprisonment and $1.99 Million in Restitution

Michael Donnelly - FraudThe Securities and Exchange Commission (“SEC”) announced today that, on April 11, 2016, a federal court in Philadelphia, Pennsylvania sentenced Michael Donnelly of Lecanto, Florida, to 99 months imprisonment, to be followed by three years of supervised release, and the payment of restitution in the amount of $1.99 million. Donnelly is the former president of Wilmington, Delaware-based Coastal Investment Advisors Inc. and its affiliated broker-dealer. Donnelly pleaded guilty to securities fraud and wire fraud in December 2015.

The SEC charged Donnelly in a parallel action filed in October 2015. According to the SEC’s complaint, from 2007 through August 2014, Donnelly took funds from elderly and unsophisticated advisory clients and brokerage customers and, instead of investing the money as promised, used it to pay for his own expenses. Read More