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[QUOTE]Originally posted by T e x: [QB] SEC, PIPEs, short-selling: [QUOTE]U.S. SECURITIES AND EXCHANGE COMMISSION Litigation Release No. 20341 / October 19, 2007 SEC v. Zev Saltsman, et al., Civil Action No. 07-CV- 4370 (NGG) (E.D.N.Y.) (filed October 19, 2007) Commission Charges Short Sellers and Corporate Insiders in Massive Scheme to Conceal the Short Sellers' Control Over Ramp Corporation and Xybernaut Corporation On October 19, 2007, the Commission filed a civil action in the U.S. District Court for the Eastern District of New York against: two short sellers, Zev Saltsman and Menachem Eitan; two former officers and directors of Xybernaut Corporation, Edward G. Newman and Steven A. Newman; a former director of Xybernaut and outside counsel to Xybernaut and Ramp Corporation, Martin E. Weisberg; and Ramp's former CEO, Andrew Brown. The Commission's complaint charges the defendants with engaging in a scheme to conceal Saltsman and Eitan's control over Ramp and Xybernaut. In particular, the Commission's complaint alleges that between 2001 and 2004, Saltsman and Eitan, through 34 nominees, invested more than $88 million in private investments in public equity ("PIPE") transactions of Xybernaut and Ramp, companies that traded on the NASDAQ Small Cap Market and the American Stock Exchange, respectively. During that period, Xybernaut issued more than 123 million shares of common stock to 21 nominees of Saltsman and Eitan in return for more than $67 million in PIPE financing. Similarly, between December 2002 and November 2004, Ramp issued more than 161 million shares of common stock to 13 nominees of Saltsman and Eitan in return for more than $21 million in PIPE financing. Xybernaut and Ramp filed 18 registration statements registering the resale of those shares, and those registration statements were misleading because, among other things, they created the impression that the investors were independent from one another and controlled by persons other than Saltsman and Eitan. Saltsman and Eitan profited from the scheme by executing short sales and covering those short positions with newly issued PIPE shares in violation of the registration provisions of the federal securities laws. Saltsman and Eitan often executed wash sales between their various nominee accounts in order to disguise these violations of the federal securities laws. As a result of their illegal conduct, Saltsman and Eitan received a total of more than $55 million in illicit profits by trading in Ramp and Xybernaut stock. The complaint also alleges that Saltsman and Eitan paid officers and directors of Ramp and Xybernaut to ensure access to future PIPE deals and maintain control over the companies. In December 2003, Saltsman and Eitan allegedly gave Brown $50,000 in cash. In 2003 and 2004, Saltsman and Eitan paid $4.1 million to Steven Newman and Weisberg. These payments, as well as the relationships that developed between the companies' management and Saltsman and Eitan, were never disclosed in Ramp or Xybernaut's corporate filings or registration statements. The Commission's complaint further alleges that during the course of the scheme, Brown, Weisberg, Edward Newman and Steven Newman provided valuable assistance to Saltsman and Eitan. In 2001, Weisberg helped Edward Newman and Steven Newman transfer a total of 1.1 million shares of their own Xybernaut stock to Saltsman and Eitan to allow Saltsman and Eitan to cover existing short positions in Xybernaut. In 2003, Weisberg lied to the Commission staff about sales of securities to Saltsman and Eitan that occurred during the pendency of a PIPE registration statement. Brown, Weisberg, Edward Newman and Steve Newman also concealed Saltsman and Eitan's control over the PIPE investments and the nominees. The complaint alleges that each of the defendants violated Section 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, and that Saltsman and Eitan also violated Sections 5(a), 5(b)(2), and 5(c) of the Securities Act and Sections 13(d) and 16(a) of the Exchange Act and Rules 13d-1, 13d-2, and 16a-3 thereunder. The complaint also alleges that Weisberg aided and abetted Xybernaut's violations of Section 14(a) of the Exchange Act and Rule 14a-9 thereunder, and that Steven Newman, Edward Newman, and Brown violated Exchange Act Rule 13a-14. The complaint further alleges that Weisberg, Steven Newman, Edward Newman and Brown aided and abetted Xybernaut and Ramp's violations of Section 13(a) of the Exchange Act and Rules 12b-20, 13a-1, and 13a-13 thereunder. In its enforcement action, the Commission is seeking an order permanently enjoining the defendants from future violations of the foregoing provisions of the federal securities laws, and a final judgment ordering disgorgement of ill-gotten gains and civil penalties. The Commission also seeks officer and director bars against Weisberg, Steven Newman, Edward Newman and Brown. The Commission acknowledges the assistance of the U.S. Attorney's Office for the Eastern District of New York and the Federal Bureau of Investigation. SEC Complaint in this matter http://www.sec.gov/litigation/litreleases/2007/lr20341.htm -------------------------------------------------------------------------------- Home | Previous Page Modified: 10/19/2007[/QUOTE] http://www.sec.gov/litigation/litreleases/2007/lr20341.htm [/QB][/QUOTE]
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