Deals
BKNI

$30M in Bond Money Squandered on Stock Manipulation, Suit Says

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Some $30 million entrusted to a money manager for bond investments was allegedly dissipated through actions including use of funds to prop up the price of a thinly traded stock so the manager could get out of his own position in the same issue. Sebastian Holdings principal Alexander Vik filed a suit accusing Michael Kugler and his Connecticut-based KJM Advisors of investing the $30 million outside a fixed income mandate, misrepresenting the value of the account, and using funds to buy shares of equities including Frankfurt-listed BKN International AG and U.S.-based PIPE issuer U.S. Precious Metals (USPR). Vik's Turks and Caicos Islands-based Sebastian Holdings filed the complaint in the New York State Supreme Court on Sept. 28. BKN was an animation company that issued PIPEs in 2005 and 2008.

Legal

Court Denies Motion to Dismiss SEC’s Gold Standard Mining Case

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A federal judge rejected attorney Kenneth Eade's motion to dismiss a Securities and Exchange Commission suit alleging that Eade filed false financial statements and misrepresented the company’s assets. The SEC filed the suit on June 29 in the U.S. District Court in Los Angeles. Gold Standard CEO Panteleimon Zachos and Eade allegedly lied, made misleading statements and omitted material facts about the company from May of 2009 through April of 2011. These actions were part of plans to create investor interest in the company, which Eade bought in 2007 when it was a shell known as Fluid Solutions, the suit claims.

In his motion to dismiss the case, Eade noted that only two of the SEC's seven allegations were directed at him, as opposed to those aimed at the company, its management and an accountant. Eade argued that the commission had failed to state a claim on which the court could act with respect to the other two charges.

Legal

Roth, Morgan Joseph Sued in Digital Domain Implosion

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Several class action suits have been filed against Digital Domain Media Group (DDMGQ) since its plunge into bankruptcy, but at least two suits name not only former management but also underwriters of the company's initial public offering. The suits allege that Roth Capital Partners and Morgan Joseph TriArtisan failed to meet their responsibility to make sure the IPO prospectus truthful and accurate. "The Underwriter Defendants acted negligently and are liable to members of the Class who purchased or otherwise acquired DDMG securities issued in the IPO," one suit alleges. "As an underwriter of the Offering," the suit says, "Roth Capital was responsible for ensuring the truthfulness and accuracy of the various statements contained in or incorporated by reference into the Offering Materials." The suits name former board chair and CEO John Textor, along with former board member, CFO and president Jonathan Teaford.

Legal

China RTO Maven Siris Accused of Fraud

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Peter Siris and  Guerrilla Capital Management stand accused of fraudulent involvement in reverse mergers involving China-based companies, according to a Securities and Exchange Commission order that requires Siris to respond to the allegations this month. PlacementTracker data indicate that Guerrilla invested $52 million in 66 PIPEs, secondaries and Regulation S deals since 2000. The most recent of those investments was a 2010 CMPO offering from SmartHeat (HEAT), which is currently the defendant in at least two class action suits. One of those suits "alleges that, throughout the Class Period, SmartHeat's Chief Executive Officer, James Jun Wang, sold $23 million of his shares in violation of several SEC rules" according to a news release from the plaintiffs' law firm. "This rapid sale of SmartHeat's stock onto the market caused its stock price to plummet."