Federal Court Orders 8000, Inc. to Pay More Than $6.5 Million in U.S. Stock Manipulation Scheme
Sep 16 15
The Securities and Exchange Commission announced that on September 14, 2015, a federal court in New York entered a final judgment by default against 8000 Inc. that ordered it to pay $6,525,000 in a civil penalty in a stock manipulation case filed by the commission in 2012. The commission alleged that the company issued numerous false press releases to inflate the value of the company so that certain parties could benefit. In addition to the company, the Commission's complaint, filed on September 27, 2012, also charged Jonathan Bryant, a consultant for the company as well as the company's former Chief Executive Officer, Thomas Kelly of Levittown, Pennsylvania, and the company's attorney, Carl N. Duncan of Bethesda, Maryland. The complaint alleged that the defendants participated in a scheme to manipulate the trading volume and price of the company’s common stock by disseminating false information about the company and simultaneously selling or facilitating the sale of its securities which were not supposed to be for sale to the general public. According to the complaint, from November 2009 through October 2010, Bryant and Kelly disseminated financial reports and press releases falsely representing that the company had millions of dollars in capital financing and revenues when, in fact, the company had neither. As the company’s stock price rose based on the false information they were disseminating, Bryant profited by selling 56.8 million "restricted" shares of the company into the market. Because the shares were restricted, they should not have been sold into the market at that time. The complaint alleged that Duncan provided false legal opinions removing the trading restrictions on the stock, and that Kelly profited from the scheme by buying and selling the company's securities in the secondary market. The complaint alleged that the defendants' scheme increased the volume of trading in 8000 Inc. by 93% and the company's stock price from less than $0.01 per share to $0.42 per share between November 2009 and October 2010. In addition to ordering the company to pay $6.5 million, the final judgment entered by the United States District Court for the Southern District of New York permanently enjoins the company from future violations of various antifraud and securities registration sections of the federal securities laws, including Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933 (Securities Act) and Section 10(b) of the Securities Exchange Act of 1934 (Exchange Act) and Rule 10b-5 thereunder. The judgment against the company concludes the Commission's case. Defendants Bryant, Kelly, and Duncan all previously settled the Commission's action. Bryant consented to the entry of a final judgment that was entered on April 7, 2015. The final judgment permanently enjoined Bryant from future violations of Sections 5(a), 5(c), and 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. The final judgment also ordered Bryant to disgorge the $2,969,525 in profits that he realized from selling the company’s restricted securities and to pay $198,659.70 in pre-judgment interest. Additionally, the final judgment barred Bryant from acting as an officer or director of any issuer that has a class of securities registered pursuant to Section 12 of the Exchange Act, and permanently barred him from participating in an offering of a penny stock. Kelly consented to the entry of a final judgment that was entered on June 6, 2013, which permanently enjoined Kelly from violating Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. It also permanently barred Kelly from acting as an officer or director of any issuer that has a class of securities registered pursuant to Section 12 of the Exchange Act, and permanently barred him from participating in an offering of a penny stock. On September 2, 2014, after a hearing, the court ordered Kelly to pay $415,569 in profits that he realized from trading in the company’s securities in the secondary market and to pay $46,697 in pre-judgment interest. Duncan agreed to settle the Commission's action at the time it was filed. In December 2012, the court entered a final judgment against Duncan that permanently enjoined Duncan from violating Sections 5(a), 5(c), and 17(a)(2) of the Securities Act, permanently enjoined him from participating in the preparation and issuance of certain opinion letters, bars him from participating in an offering of a penny stock, and ordered him to disgorge $15,570 in unlawful proceeds and to pay $524.98 in prejudgment interest and a $25,000 civil money penalty. Duncan also consented to an administrative order issued pursuant to Rule 102(e)(3) of the Commission's Rules of Practice permanently suspending him from appearing or practicing before the Commission as an attorney.