Legal

China MediaExpress Charged with Fraudulent Financial Reporting by SEC

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The Securities and Exchange Commission is charging China-based reverse merger company China MediaExpress (CMEE) and its CEO with fraudulently misleading investors about its financial condition. China MediaExpress claimed that their cash balances were millions of dollars higher than actual amounts. The charges come more than two years after reports in the financial media and from short-biased research firms began suggesting the company, once named by Forbes China as the country's top "up-and-comer," was actually a massive fraud. China MediaExpress operates a television advertising network on airport express and inner-city public transit. The June 20 complaint charges CEO Zheng Cheng and China MediaExpress with violations of multiple antifraud provisions of federal securities laws, which could result in financial penalties, permanent injunctions, disgorgement, and an officer and director bar against Zheng.

Legal
Peter Siris

PIPE, Reverse Merger Cases Featured in SEC Whistleblower Eligibility List

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PIPE issuers and reverse merger companies are among parties named in a list of Securities and Exchange Commission enforcement actions that could earn cash rewards for whistleblowers. The list also includes an action against parties who allegedly reaped millions of dollars of illegal profits through improper sales of shares in a micro-cap company with negligible prospects. The Securities and Exchange Commission's Office of the Whistleblower published the list, which tracks enforcements where monetary sanctions exceed $1 million. "Subject to the Final Rules, individuals who voluntarily provided the Commission with original information after July 21, 2010 that led to the successful enforcement of a covered action listed below are eligible to apply for a whistleblower award," the commission's website says. It remains to be seen whether individuals will come forward to seek rewards.

Legal
Eco Building

Eco Building Settles Alpha Capital Suit

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PIPE issuer Eco Building Products (ECOB) settled a suit filed by Alpha Capital Anstalt, which alleged Eco Building failed to pay off a debenture on its Nov. 13 due date last year. The suit also alleged Eco Building improperly issued stock to a third party to which Alpha assigned its interest in the debenture. Alpha has invested over $75 million in 128 stock and debt PIPEs since 2006. It is managed by LH Financial, which has put $292 million into 547 deals since 2003.

Legal

SEC Says Laidlaw Energy Dumped Shares, Hid Problems

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Laidlaw Energy Group (LLEG) and its CEO Michael Bartoszek duped investors into believing Laidlaw was a viable business, even as they profited from illegal backdoor sales of over two billion shares of the company's stock, according to a Securities and Exchange Commission lawsuit. The suit was filed against New York-based Laidlaw on June 5 in a Manhattan U.S. District Court. Bartoszek allegedly orchestrated the "illegal fire sale of more 80 percent of Laidlaw's stock" from 2006 to January of 2010, according to a commission news release. The company formed through a reverse merger with Poly-Eko Systems in 2002. The SEC's Microcap Fraud Working Group assisted in the investigation.