Friday, February 7, 2014

SEC Litigation Releases: Week in Review

Court of Appeals Denies Stay of Order Compelling Investigative Testimony; Affirms District Court's Exercise of Discretion, February 6, 2014, (Litigation Release No. 22920)

This week the court issued a "summary order denying Edward Daspin’s motion for a stay" on a December 2013 order. This means that Daspin is required "to appear for investigative testimony in compliance with an SEC investigative subpoena" and was denied a "request that the SEC be required to pay for Daspin’s physician to attend the testimony."

SEC Obtains Final Judgments Against Joseph Paul Zada and Zada Enterprises, LLC, February 5, 2014, (Litigation Release No. 22919)

Final judgments were entered against Joseph Paul Zada and Zada Enterprises, LLC for their involvement in a scheme where Zada allegedly "raised at least $27.5 million from at least 60 investors between January 2006 and August 2009 through the fraudulent offer and sale of unregistered securities in the form of promissory notes." The final judgment permanently enjoins the defendants from future violations of the securities laws and orders them to pay over $121,000 in disgorgement, prejudgment interest, and civil penalties.

Jury Finds Stephen Kovzan Not Liable for Securities Violations, February 4, 2014, (Litigation Release No. 22918)

In December a federal jury found that Steven Kovzan is "not liable for violating various provisions of the federal securities laws." In 2011, the SEC had filed a complaint against Kovzan "alleging that he violated certain provisions of the federal securities laws by concealing perquisite compensation of the former Chief Executive Officer of NIC, Inc."

Jury Finds Defendants Not Liable for Insider Trading, February 4, 2014, (Litigation Release No. 22917)

Last week, following a nine day trial, a federal jury "declined to find Rex C. Steffes and his three sons, Cliff M. Steffes, Bret W. Steffes and Rex R. Steffes, liable" for insider trading in Florida East Coast Industries, Inc.'s securities.

SEC Obtains Asset Freeze and Other Relief Against Michael P. Zenger, February 4, 2014, (Litigation Release No. 22916)

The SEC obtained "a temporary restraining order and an emergency asset freeze in an offering fraud orchestrated by" Michael P. Zenger (PDF). According to the complaint, "Zenger solicited at least $200,000" and then misappropriated $100,000 of those funds "to pay personal expenses, including airplane rentals, monthly credit card bills, payments to BMW and Mercedes Benz, purchases at Saks Fifth Avenue, Nordstrom and Costco, and other personal expenses." The SEC has charged Zenger with violating the Securities Act and Exchange Act and seeks "a preliminary and permanent injunction as well as disgorgement, prejudgment interest and civil penalties from Zenger."

SEC Charges Bermudian Investment Adviser and Principal for Illegal Short Selling, February 3, 2014, (Litigation Release No. 22915)

According to the complaint (PDF), Revelation Capital Management Ltd. and its principal, Christopher P.C. Kuchanny, illegally short sold in connection with "Central Fund of Canada Limited's November 2009 offering" and thereby violated Rule 105. The SEC seeks permanent injunctions, disgorgement, prejudgment interest, and civil penalties.

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