Friday, January 25, 2013

SEC Litigation Releases: Week in Review

Randy M. Cho Sentenced to Prison Term of 12 Years in Criminal Action, January 24, 2013, (Litigation Release No. 22601)

Randy M. Cho was sentenced in a criminal action to 12 years in federal prison on charges of "perpetrating an investment scheme between 2001 and October 2009, which resulted in almost $8 million in losses from 57 investors." In addition to the prison sentence, Cho has been ordered to pay restitution of almost $8 million. In 2009, the SEC permanently enjoined Cho from violating antifraud provisions of the securities laws for related charges. In 2010, the SEC "obtained a final judgment against Cho" which ordered him to pay over $7.9 million in disgorgement, prejudgment interest and civil penalties.

District Court Denies China-Based Company's Motion to Dismiss SEC Enforcement Action, January 24, 2013, (Litigation Release No. 22600)

AutoChina International Limited's motion to dismiss "an SEC enforcement action...for lack of proper venue, or in the alternative, to transfer venue to a federal court in New York" has been dismissed by the District Court for the District of Massachusetts. The SEC's original complaint charged AutoChina, Victory First Limited, Rainbow Yield Limited, Hui Kai Yan, Rui Ge Dong, Yong Qi Li, Ai Xi Ji, Ye Wang, Zhong Wen Zhang, Li Xin Ma, Yong Li Li, and Shu Ling Li with fraudulently trading "AutoChina’s stock to boost its daily trading volume." According to the complaint, "on some days, the defendants and related accounts’ trading accounted for as much as 70% of the trading of AutoChina’s stock." The defendants have all been charged with violating various provisions of the securities laws. The SEC seeks permanent enjoinment, disgorgement, prejudgment interest, and financial penalties against all of the defendants, as well as an officer and director bar against Hui Kai Yan.

SEC Charges Jonathan C. Gilchrist with the Unregistered Offer and Sale of Securities and Stock Manipulation, January 23, 2013, (Litigation Release No. 22599)

According to the complaint (opens to PDF), Jonathan C. Gilchrist "effected the unregistered offer and sale" of 6 million shares of The Alternative Energy Technology Center, Inc. (formerly Mortgage Xpress, Inc.) and "engaged in a stock manipulation scheme" that resulted in over $692,000 in illicit profit. Throughout the course of the scheme, which lasted from January through March 2008, Gilchrist "made unregistered sales of 229,661 shares." The SEC has charged Gilchrist with violating various sections of the Securities Act and Exchange Act and seeks permanent enjoinment, disgorgement, and monetary penalties against him as well as a penny stock bar and officer and director bar.

Judgment Entered Against Vision Securities, Daniel James Gallagher, Christopher Castaldo, and Corporate Communications Corp.; Claims Against Frank Zangara Dismissed, January 23, 2013, (Litigation Release No. 22598)

A final judgment was entered against  Daniel James Gallagher, Vision Securities, Christopher Castaldo, and Corporate Communications Corp. The SEC "voluntarily dismissed with prejudice" claims against Frank Zangara and B.H.I. Group, Inc. Gallagher, Vision Securities, and Castaldo have been ordered to pay over $460,000 (jointly and severally) in disgorgement, prejudgment interest, and penalties.

Kenneth A. Dachman Sentenced to 10 Years in Prison and Ordered to Pay Over $4 Million in Restitution, January 23, 2013, (Litigation Release No. 22597)

Last week, Kenneth A. Dachman was sentenced in a criminal action to "120 months in prison on 11 counts of wire fraud and ordered...to pay more than $4 million in restitution to his victims." From 2008 to 2010, Dachman allegedly raised over "$4 million from investors for his now-defunct sleep disorder businesses, Central Sleep Diagnostics, LLC and Advanced Sleep Devices, LLC" and "misappropriated more than $2 million of commingled investor funds." The SEC filed a civil injunctive action against Dachman last February. The action "has been stayed pending the outcome of the criminal case."

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