Enforcement Actions: Week in Review

SEC ENFORCEMENT ACTIONS

 

SEC Charges Eight for Roles in Widespread Pump-And-Dump Scheme Involving California-Based Microcap Company, September 18, 2014 (Litigation Release No. 23087)

Charges were filed against eight individuals cooperating in what the SEC alleges is a “pump-and-dump scheme involving a penny stock company…that has repeatedly changed its name and purported line of business over the past several years.” The SEC named Izak Zirk de Maison and Angelique de Maison as the key organizers of the scheme, and obtained an emergency court order to freeze the de Maison's assets, as well as the assets of the other six individuals that the de Maisons brought into the enterprise. The SEC’s investigation is slated to continue in conjunction with investigations by the US Attorney’s Office for the Northern District of Ohio, the FBI’s Cleveland Division and FINRA. The US Attorney and the FBI announced criminal charges against Zirk de Maison on September 18 as well.

 

SEC Charges It Employee At Law Firm with Insider Trading Ahead of Merger Announcements, September 18, 2014 (Litigation Release No. 23086)

 

Insider trading charges were filed against Dimitry Braverman, a senior IT worker at Wilson Sonsini Goodrich & Rosati. According to the SEC, Braverman “had access to nonpublic information in the firm's client-related databases and garnered more than $300,000 in illicit profits by trading in advance of merger announcements.” The US Attorney’s Office for the Southern District of New York announced parallel criminal charges against Braverman. The SEC investigation will continue in conjunction with the US Attorney, the FBI, FINRA and Options Regulatory Surveillance Authority.

 

SEC Obtains Asset Freeze Against Company in Turks and Caicos Islands Behind South Florida-Based Ponzi Scheme, September 16, 2014 (Litigation Release No. 23085)

 

The SEC obtained an emergency asset freeze against Abatement Corp. Holding Company Limited, a company based in Turks and Caicos Islands. The SEC alleges that Abatement Corp. and its late principal Joseph Laurer “falsely promised investors safe, guaranteed returns while engaging in an offering fraud and Ponzi scheme from November 2004 until Laurer's death on May 15, 2014.” The SEC also named Laurer’s widow Brenda Davis and International Balanced Fund, another company run by Laurer, as relief defendants, due to their receipt of investor funds. Allegations include the complaint that Abatement Corp. defrauded about 50 investors in South Florida of more than $4.6 million. The SEC is in the process of litigation, and is working with FINRA as well as the Turks and Caicos Islands Financial Services Commission.

 

 

Court Orders Joseph D. Stilwell to Testify in Response to SEC Investigative Subpoena, September 16, 2014 (Litigation Release No. 23084)

After filing an application to enforce its investigative subpoena on August 13, the SEC announced that the US District Court for the Southern District of New York had entered an order requiring Joseph D. Stilwell to testify. The SEC is investigating whether Stilwell’s company, Stilwell Value, LLC, violated anti-fraud securities laws. The Commission is still in the process of conducting a fact-finding inquiry and has not made any allegations of misconduct thus far.

 

 

SEC Charges Ddbo Consulting, Inc., Calpacific Equity Group, LLC, and Principals with Fraud and Registration Violations, September 18, 2014 (Litigation Release No. 23083)

                                                                                                                                                  

Civil actions were filed in the US District Court “against individuals and companies behind a boiler room scheme that hyped a company whose new technology was purportedly to be used in the Super Bowl.” This action followed a previous SEC charge against the operators of the scheme, which revolved around pressuring investors to purchase stock in Thought Development Inc. (TDI). The four executives in question, who operate DDBO Consulting, Inc., DBBG Consulting, Inc. and CalPacific Equity Group, LLC, promised investors that TDI’s initial public offering was imminent, although this did not turn out to be the case. More than 110 investors purchased about $1.7 million in TDI shares. In addition to charging the companies, the SEC charged Dean R. Baker, Daniel R. Baker, Bret A. Grove and Demosthenes Dristas, all of whom agreed to settle. The US Attorney’s Office for the Central District of California has announced criminal charges against Daniel Baker and Demosthenes Dristas.