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Strategies & Market Trends : Anthony @ Equity Investigations, Dear Anthony,

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To: anniebonny who wrote (103259)4/8/2008 2:49:34 PM
From: anniebonny   of 122049
 
U.S. Securities and Exchange Commission
Litigation Release No. 18381 / September 30, 2003
Securities and Exchange Commission v. 2DoTrade, Inc., George Russell Taylor, Barry William Gewin aka Barry Peters, Eric T. Landis, Dominic Roelandt, Michael D. Karsch, L. Van Stillman, David A. Wood, Jr., Clinton Walker, Oxford and Hayes, Ltd., FG & P Consulting, Ltd., Hackney Holdings, Ltd., Weston Partners, Inc., Infiniti Corporate Services, Ltd., Argo Financial, Ltd., 21st Equity Partners, Inc., MCG Partners, Inc., and LMR, Ltd., Civil Action Number 3:03-CV-2246-N(Godbey) (N.D. Texas, Dallas Division)
Securities and Exchange Commission v. Craig J. Shaber, Stephen R. Wright, and Bonaventure Capital, Ltd., defendants, and Aspen International Marketing, Inc. and Wright & Geis, Inc., relief defendants. Civil Action No. 3:03-CV-2247-G(Fish) (N.D. Texas, Dallas Division).
SEC Files Lawsuit Against 2DoTrade, Inc., Its President, Several Stock Promoters, and Two Attorneys In Bogus Anti-Anthrax, Pump-and-Dump Scheme -- Also Files Related Lawsuit Against California Attorney and Accountant for $7.5 million "Shell-Factory" Scheme
On September 30, 2003, the Securities and Exchange Commission filed a lawsuit against 2DoTrade, Inc., its president, several recidivist stock promoters, and two attorneys in a "pump-and-dump" market-manipulation case. 2DoTrade is an SEC-reporting company whose stock was formerly quoted publicly on the OTC Bulletin Board. According to the SEC's complaint, from July to November 2001, the defendants engaged in a fraudulent scheme in which they artificially pumped 2DoTrade's stock with false press releases, spam e-mail, and a fraudulent website and then illegally dumped millions of shares into the inflated market. At one point in the scheme-amid recurring reports of fatal anthrax attacks in the United States-several of the defendants sought to profit from the nation's fear of terrorism with false press releases about 2DoTrade's purported imminent distribution of an anti-anthrax compound in the United States. In a separate civil lawsuit filed on the same day, the SEC alleged securities fraud and other violations against a California attorney and accountant who created and sold the public shell company used in the 2DoTrade scheme.

The 2DoTrade complaint alleges that, in June 2001, defendants Barry W. Gewin, 36, of Enon Valley, Pennsylvania, Eric T. Landis, 38, of Charlottesville, Virginia, and Dominic Roelandt, 26, of Dehderhoutem, Belgium, gained de facto control of 2DoTrade-a shell company with no assets or revenue-by acquiring control over virtually all of its "free-trading" stock. Then, in collusion with 2DoTrade's president, defendant George R. Taylor of Ayrshire, Scotland, they manipulated 2DoTrade's stock price in two fraudulent promotional campaigns. The first campaign, which took place in July and August 2001, touted 2DoTrade's ownership of certain import/export contracts supposedly worth $300 million. In reality, these contracts were worthless. The second campaign, which began in October 2001, claimed that 2DoTrade was testing an anti-anthrax compound called "ATHOQ" at a hospital and a university in the United Kingdom for imminent distribution in the United States. In reality, ATHOQ was a sham, and no anthrax testing or product distribution ever occurred.

During the bogus-contract campaign, the defendants dumped millions of shares into the market, collectively realizing approximately $1.6 million in trading profits. As the defendant's sold their shares, the share price gradually declined by the end of August 2001. Beginning on October 31, 2001, however, the bogus anti-anthrax campaign drove up 2DoTrade's stock price again, this time by approximately 400%. During this period, certain defendants dumped over 700,000 shares into the market, for which they collectively received approximately $240,000. An SEC trading suspension on November 6, 2001, halted trading in 2DoTrade's stock and prevented some of the defendants from dumping millions of additional shares.

Other defendants named in the SEC's 2DoTrade complaint are:

Oxford and Hayes, Ltd., DBE Consulting, Ltd., and FG&P Consulting, Ltd., three Belize-registered companies controlled by Gewin. Gewin used offshore accounts in their names to sell approximately 869,000 shares of 2DoTrade stock during the fraudulent promotional campaigns, realizing approximately $318,288 in ill-gotten gains.

Infiniti Corporate Services, Ltd., a Bahamas corporation, and Argo Financial, Ltd., a Cayman Islands corporation, both controlled by Roelandt. Roelandt used offshore accounts in their names to sell approximately 1.85 million 2DoTrade shares during the fraudulent promotional campaigns, realizing approximately $474,005 in ill-gotten gains.

Hackney Holdings, Ltd., a Cayman Islands corporation, and Weston Partners, Inc., a Connecticut corporation, both controlled by Landis. Landis used domestic and offshore accounts in their names to sell 216,000 2DoTrade shares during the fraudulent promotional campaigns, realizing approximately $154,300 in ill-gotten gains.

MCG Partners, Inc., a Florida corporation, and Michael Karsch, 41, an attorney licensed in Florida, Texas, and New York. Karsch was a managing director of MCG Partners, which provided $450,000 to Gewin, Roelandt, and Landis for the purchase of an OTC Bulletin Board shell company, which ultimately became 2DoTrade. In exchange for the $450,000, Karsch and MCG Partners received 1.1 million 2DoTrade shares and a guarantee that other defendants would sustain 2DoTrade's stock price by touting the bogus contracts in a promotional campaign. Under this arrangement, MCG Partners sold 1.1 million shares for approximately $555,191, realizing a profit of approximately $105,191. Karsch received a share of these profits.

21st Equity Partners, Inc., a North Carolina corporation, its president David A. Wood, Jr., 50, of Charlotte, North Carolina, and its vice-president Clinton Walker, 33, also of Charlotte. On June 26, 2001, Wood and Walker orchestrated a manipulative matched trade with Gewin and Landis to artificially set the initial market price of 2DoTrade stock at $1.25. Wood offered and sold approximately 293,000 2DoTrade shares through a 21st Equity Partners account for approximately $154,670. Walker received at least 101,350 shares of 2DoTrade stock, which he sold for approximately $52,520.

L. Van Stillman, 54, an attorney licensed in Florida and Pennsylvania, and LMR, Ltd., an offshore company that he controlled. Stillman prepared false SEC filings on behalf of 2DoTrade, concealing Gewin, Landis, and Roelandt's beneficial ownership of 2DoTrade's stock. Stillman sold approximately 192,000 2DoTrade shares, mostly through an LMR, Ltd. brokerage account in Bermuda, realizing approximately $95,370 in ill-gotten trading profits.

Several of the 2DoTrade defendants have prior disciplinary histories. In 1992, Taylor was convicted in the United Kingdom of conspiracy to commit theft. Roelandt was enjoined in August 2000 by the United States District Court for the Northern District of Arizona for securities fraud in an action bought by the SEC, and in 2001, in another unrelated SEC action, he received an administrative penny-stock bar from the SEC. In 1999, the NASD suspended Landis' brokerage license for one year and fined him for market manipulation. And in 1998, Wood was the subject of an SEC cease-and-desist order for violations of the anti-touting provisions of the federal securities laws.

The Commission's complaint alleges that defendant 2DoTrade violated the securities-registration, anti-fraud, and issuer-reporting provisions of the federal securities laws, specifically, sections 5(a), 5(c), and 17(a) of the Securities Act of 1933 ("Securities Act") and sections 10(b) and 13(a) of the Securities Exchange Act of 1934 ("Exchange Act") and Rules 10b-5, 12b-20, 13a-1, 13a-11, and 13a-13 thereunder. It alleges that defendant Taylor violated the anti-fraud provisions and aided and abetted 2DoTrade's violations of the issuer reporting provisions. It alleges that defendants Gewin, Roelandt, and Landis, and the defendant companies they controlled, violated the securities-registration and anti-fraud provisions and also the beneficial-ownership and principal-shareholder reporting provisions of the federal securities laws, specifically, sections 13(d) and 16(a) of the Exchange Act and Rules 13d-1, 16a-2, and 16a-3 thereunder. And it alleges that defendants, Karsch, Stillman, Wood, and Walker, and the defendant companies under their control, violated the securities-registration and anti-fraud provisions and that Stillman also aided and abetted 2DoTrade's violations of the issuer reporting provisions of the federal securities laws.

The SEC seeks, among other relief, permanent injunctions, disgorgement of ill-gotten gains with pre-judgment interest, and civil money penalties against all the defendants; officer-and-director bars against Taylor, Gewin, Roelandt, and Wood; penny-stock bars against Taylor, Gewin, Roelandt, Wood, Walker, and Karsch; and an order enjoining Roelandt from violating section 15(b)(6)(B) of the Exchange Act, which prohibits participation in a penny-stock offering in contravention of an SEC order.

The Fraudulent "Shell Factory"

Also on September 30, 2003, the SEC filed a related lawsuit in the United States District Court for the Northern District of Texas against Craig J. Shaber, 45, a California-licensed attorney and Stephen R. Wright, 57, an accountant, both from the San Diego, California area. According to the complaint, from 1998 to 2002, Shaber and Wright engaged in an elaborate scheme to manufacture and sell 18 public shell companies, from which they derived at least $7.5 million in ill-gotten gains. To carry out the "shell factory" scheme, Shaber and Wright installed nominee officers and directors in dormant corporations that they controlled and caused these companies to submit false registration statements and reports to the SEC and the NASD, Inc. These false documents gave the bogus companies the appearance of legitimacy and permitted their securities to be eligible for quotation on the OTC Bulletin Board.

Among other things, the false registration statements and reports contained phony business plans, misrepresented the identity of the companies' true officers and directors, and contained false shareholder lists. In reality, Shaber and Wright owned virtually all of the companies' stock, and the individual shareholders listed in the documents were merely nominees for Shaber and Wright. In addition, Shaber and Wright served as the de facto officers and directors of the companies and intended not to pursue the stated business plans, but rather, to sell their controlling blocks of shares-and thus control of the shell companies-to stock promoters and other buyers for substantial profits. Shaber and Wright sold one of these fraudulently manufactured companies, Moranzo, Inc., for approximately $600,000 to certain 2DoTrade defendants, who then used it to create 2DoTrade and carry out that scheme.

The other defendant and relief defendants in the Shaber and Wright case are:

Bonaventure Capital, Ltd., defendant, a private Nevada corporation controlled by Shaber and Wright. Through Bonaventure Capital, Shaber and Wright maintained a bank account into which they deposited the funds from the sale of the stock in the public shell companies and maintained a brokerage account through which they sold securities in the public shell entities. Shaber and Wright, and entities they individually controlled, shared in the ill-gotten proceeds from the Bonaventure Capital accounts.

Wright & Geis, Inc., relief defendant, is a California corporation solely owned by Wright. It received at least $100,000 from a Bonaventure Capital bank account as proceeds from the scheme.

Aspen International Marketing, Inc., relief defendant, is a Nevada corporation owned by Shaber. It received at least $1 million in proceeds from the fraudulent scheme.

The complaint alleges that Shaber, Wright, and Bonaventure Capital violated the securities-registration, anti-fraud, beneficial-ownership, and principal-shareholder reporting provisions of the federal securities laws, specifically, sections 5(a), 5(c), and 17(a) of the Securities Act and sections 10(b), 13(d), and 16(a) of the Exchange Act and Rules 10b-5, 13d-1, 16a-2, and 16a-3 thereunder. It further alleges that they aided and abetted violations of the issuer-reporting provisions, specifically, sections 13(a) of Exchange Act and Rules 12b-20, 13a-1, and 13a-13 thereunder. The SEC seeks disgorgement with prejudgment interest from each defendant and relief defendant and further seeks permanent injunctions, an accounting, and officer-and-director bars against defendants Shaber and Wright.

The Commission acknowledges the assistance of the Cayman Islands Monetary Authority, the British Columbia Securities Commission, the Police Department of Tayside, Scotland, the London Metropolitan Police Department, the Hampshire Constabulary in England, the FBI's Dallas Field Office, and the United States Department of Justice in the investigation of this matter.

SEC Complaint in this matter

Second SEC Complaint in this matter



sec.gov
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