Markets
MKTS

Turmoil at Direct Markets/Rodman & Renshaw

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Direct Markets Holdings Corp. (MKTS) on Thursday updated its listing status on Nasdaq and announced that Kevin Lupowitz had resigned from the board of directors and would not assume the role of CEO on Sept. 1. The disclosures, revealed in a filing with the Securities and Exchange Commission, are the latest in a string of challenges acknowledged by the transitioning company. While trying to develop its DirectMarkets electronic platform that connects private placement issuers and investors, the company has shed assets that it purchased from Investor Relations Group (IRG) in February and is attempting to spin off its broker dealer arm, Rodman & Renshaw, which for years had been one of the most prolific PIPE placement agents in the market.

Legal

Hedge Funds Say China Medical CEO Tanked Company with Transfers to Family

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China Medical Technologies (CMEDY) was already on financially shaky ground before three hedge funds accused the company’s CEO Xiaodong Wu of further destabilizing the company by illegally transferring much of its assets to relatives. China Medical had already defaulted on two series of convertible notes, and Nasdaq had delisted its shares. Investors Whitebox Advisors, GLG Partners and Visium Asset Management made the claims in a suit they filed against Wu’s son-in-law Henry Mann and daughter-in-law Bi Junyun in the New York Supreme Court on Aug. 22. Wu himself was not named in the suit.

Legal

Funds Sue DJSP over Post-SPAC Disclosure

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Two hedge funds are suing a foreclosure processing business that went public in 2010 when it combined with SPAC Chardan 2008 China Acquisition Corp. (CACA). Blue Lion Master Fund and Philadelphia Financial Management of San Francisco allege that foreclosure farm DJSP Enterprises (DJSP) and management including founder David Stern issued misleading financial data to drive the company’s stock higher so investors could exercise warrants issued when the SPAC went public. Millions of dollars from the warrants would have been channeled to Stern or entities he was associated with, according to the suit. SPACs, or Special Purpose Acquisition Companies, are designed to raise capital in an IPO and then select an acquisition target.

Legal

SEC Posts General Solicitation Proposal

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The Securities and Exchange Commission on Wednesday voted 4 to 1 to propose rules to eliminate the ban on general solicitation in Rule 506 offerings under Regulation D and to provide issuers with guidance when advertising such deals. The JOBS Act called for end to the ban on general solicitation and directed the SEC to craft rules reflecting the change. The commission posted the proposal this afternoon. See our full coverage and analysis of the commission's JOBS Act policy implementation in next week's issue of Growth Capital Investor.