The Securities and Exchange Commission announced a settlement and made two charges in three separate fraud cases over the past week.
In the first of the cases, the SEC announced on April 9 that it had settled a case against Benedict Van, a San Jose, Calif., man who had fraudulently raised nearly $7 million from investors for an IPO in two companies that he claimed would become the “next Google.” Van had promised those investors that they would receive “millions in quick returns” when he took public two Silicon Valley web-based startups, hereUare Inc. and eCity Inc. He fraudulently presented himself as a venture capitalist to prospective investors, primarily in their homes in Sacramento and Stockton, Calif., and also falsely claimed that he had retained Goldman Sachs as an advisor for the IPO.
In fact, the SEC said in a statement, Van had “no plans to take the companies public and relied solely on investor funds to stay in business.” When those investor funds ran out by the end of 2008, Van was forced to shut down operations.
The moral of the story, said Marc Fagel, director of the SEC’s San Francisco Regional Office, is that “Investors should be wary of pitches promising IPO riches from companies with minimal operations and track records.”
The SEC said Van, hereUare and eCity agreed to settle the charges against them without admitting or denying the SEC’s allegations and have consented to permanent injunctions. Van also consented to a court order that permanently bars him from serving as a public company officer or director, and hereUare consented to an administrative proceeding order deregistering its stock with the SEC.
While the judgment in Federal District Court for the Northern District of California in San Francisco ordered Van to pay civil penalties and to “disgorge his ill-gotten gains,” the SEC waived any financial payment against Van based, the Commission said, on his “demonstrated inability to pay.”
In the second fraud case, in U.S. District Court in Massachusetts, the SEC charged a China-based company, AutoChina Intl. Ltd., and 11 individuals with conducting a market manipulation scheme that was meant to fraudulently create a “liquid and active market” for AutoChina’s stock, which traded on Nasdaq until October 2011 under the ticker AUTC (since its delisting then, the stock has traded on OTC Link under the ticker AUTCF.PK).
The complaint, part of an ongoing investigation, charges that beginning in late 2010, the defendants’ scheme artificially raised trading volume in AUTC, “enhancing the company’s ability to get much-needed financing.”