Legal
ZST Technologies

Chinese Reverse Merger Investor Succeeds in Asset Hunt

By |

A single high net worth investor is taking on a U.S. exchange traded China-based company, ZST Digital (ZSTN), whose stock went into a free-fall when the company stopped filing SEC financials in late 2011. The investor, Peter Deutsch, and his long time lawyer, David Graff, were able to get a New York federal judge to issue ex-parte orders which enabled them to raid the Brooklyn, N.Y. home of ZST's former CFO, Henry Ngan, and the offices of the U.S.-based investor relations firm Taylor Rafferty. Ngan's cell phone was seized in the raids and is in possession of a court appointed receiver. Growth Capital Investor has learned that the phone has messages on it showing in late 2011 ZST was communicating with several U.S.-based institutional firms about depressing the company’s stock price in order to make it easier for ZST’s CEO to buy it back and take the company private again. The scheme – to raise money from U.S. investors, then depress the stock by going dark on financial reporting, in order to buy it back cheap and go private – was only a theory Deutsch used in his initial motion filed in Delaware. That motion asked the Chancery Court to see the company’s books and records after CFO Ngan denied him access.

Legal

GelTech Sues Knight Capital, FINRA over Suspicious Trades

By |

After its stock suffered in unusual trading activity in February and March, GelTech Solutions (GLTC) is suing FINRA and clearing agent Knight Capital Group (KCG) in an effort to determine the identity of parties who allegedly manipulated prices of GelTech Stock. GelTech filed the action on May 7 in the New York State Supreme Court. Juniper, Fla.-based GelTech sells fire suppression products and IceWear clothing that holds down body temperatures. The company says its FireGel product is an environmentally harmless means of fighting fire efficiently while using less water than traditional methods. Issuers with stock manipulation claims tend to face problems obtaining trading information in lawsuits even when they know the identity of the alleged culprit.

Legal
crowdfunding

Online Angel Funding Model Greenlighted by SEC?

By |

While rulemaking to implement the equity crowdfunding mandates of the JOBS Act remains in limbo awaiting the seating of a new SEC chair, the agency moved last week to approve an online angel funding group’s compensation model that would be exempt from some of the JOBS Act’s more costly and vexing requirements for crowdfunding platforms. The approval of FundersClub’s “carried interest” model  paves the way for angel platforms to begin raising funds from accredited crowd investors immediately. In a No-Action letter published last week the SEC said that FundersClub’s proposed compensation model, which relies solely on carried interest in its funded companies, qualified for the angel platform exemption from registration, general solicitation and broker-dealer requirements for Title II and III equity crowdfunding platforms in the JOBS Act’s Section 201(c). The SEC’s move is significant because it allows online funding platforms that restrict their investors to bona fide accredited investors and only take compensation from the investment gains of stakes held in the platform’s portfolio companies to begin fundraising immediately without further rulemaking from the agency. The rulemaking to implement Title II-style equity crowdfunding has been stalled for seven months after the SEC released a proposed rule addressing the mandated repeal of the general solicitation rule for restricted securities which was widely criticized as opening the flood gates to fraud. Former SEC chair Mary Shapiro left the agency in December without finalizing the repeal of the solicitation rule, reportedly fearing a repeal would ruin her legacy as a securities regulator.

Legal
Corey Ribotsky

AJW Liquidators Sue NIR, Ribotsky in New York State Court

By |

PwC Corporate Finance and Recovery, Cayman Islands liquidators of several AJW funds managed by Corey Ribotsky and NIR Group, has sued Ribotsky and NIR for damages in the New York State Supreme Court. The move follows the liquidators’ successful attempt to obtain Chapter 15 recognition from a U.S. Bankruptcy Court in February. Funds managed by NIR, which include four AJW entities and New Millennium Capital Partners II, committed $225 million to 144 PIPEs from 1999 through 2010, according to PlacementTracker data. Ribotsky and NIR have not yet answered or responded to the New York state suit. Ribotsky has previously lodged extensive and detailed objections to allegations made by the SEC and by the liquidators in their bankruptcy case.