Securities and Exchange Commission v. Danny Garber, Michael Manis, Kenneth Yellin, Jordan Feinstein, Aluma Holdings LLC, Azure Trading LLC, Coastal Group Holdings, Inc., Greyhawk Equities LLC, Leonidas Group Holdings LLC, The Leonidas Group LLC, Nismic Sales Corp., The OGP Group, Perlinda Enterprises LLC, Rio Sterling Holding LLC, Slow Train Holding LLC, and Spartan Group Holdings LLC, Civil Action No. 12 Civ. 9339 (SAS) (S.D.N.Y.)
SEC CHARGES FOUR PENNY STOCK PURCHASERS WITH FRAUD
The Securities and Exchange Commission recently charged four securities industry professionals with conducting a fraudulent penny stock scheme in which they illegally acquired over a billion unregistered shares in microcap companies at deep discounts and then dumped them on the market while claiming bogus exemptions from the registration provisions of the federal securities laws.
The SEC Complaint alleges that, from at least early 2007 until 2010, Danny Garber, Michael Manis, Kenneth Yellin, and Jordan Feinstein acquired shares at about 30 to 60 percent off the market price by misrepresenting to the penny stock companies that they intended to hold the shares for investment purposes rather than immediately re-selling them. Instead, they immediately sold the shares without registering them by purporting to rely on an exemption for transactions that are in compliance with certain types of state law exemptions. However, no such state law exemptions were applicable to their transactions. To create the appearance that the claimed exemptions were valid, they created virtual corporate presences in Minnesota, Texas, and Delaware. The SEC also charged 12 entities that they operated in connection with the scheme.
The SEC's action was filed in the U.S. District Court for the Southern District of New York, alleging violations by Garber, Manis, Yellin, Feinstein and the named entities of Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933; Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5. The SEC's complaint seeks a final judgment, among other things, ordering all of the defendants to pay disgorgement, prejudgment interest and financial penalties; permanently enjoining all the defendants from future violations of the securities laws; and permanently enjoining all the defendants from participating in penny stock offerings.
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