SEC: Purported Green Technology Company Defrauding Investors

The Securities and Exchange Commission today charged a California-based company and two executives with using baseless financial projections and other misleading statements to defraud investors in a venture to manufacture environmentally-friendly building materials.

The SEC alleges that Enviro Board Corporation and its co-chairmen/CEOs Glenn Camp and William Peiffer raised approximately $6 million from investors during a four-year period by using documents predicting company earnings ranging from $18 million to $95 million per year.  They allegedly lacked any reasonable basis for such estimates amid persistent manufacturing problems plaguing the company since its inception.  Enviro Board claimed its green materials had already been used in residential and commercial construction projects, yet the company has never developed a commercially viable mill to manufacture its products.  Among other alleged misrepresentations to investors were claims to have secured $161 million in financing from a “vendor” that turned out to be nothing more than an entity created by Peiffer that lacked the resources to actually make such a loan.

Meanwhile, according to the SEC’s complaint filed in federal court in Los Angeles, Camp and Peiffer and their primary salesman Joshua Mosshart have paid themselves approximately $2.6 million in compensation out of investor funds.  Mosshart also is named in the SEC’s complaint and charged with selling unregistered securities and acting as an unregistered broker.

“We allege that Enviro Board appealed to investors’ desires to benefit the environment by creating the false impression that it was on the cusp of lucrative operations.  But Camp and Peiffer were merely lining their own pockets while their unviable manufacturing process has failed to commercialize after nearly 20 years of trying,” said Michele Wein Layne, Director of the SEC’s Los Angeles Regional Office.

The SEC’s complaint charges Enviro Board, Camp, and Peiffer with violating Section 17(a)(2) of the Securities Act of 1933 as well as Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5(b).  The complaint further charges Camp and Mosshart with violating Sections 5(a) and 5(c) of the Securities Act and Mosshart with violating Section 15(a) of the Exchange Act.  The complaint seeks permanent injunctions, disgorgement of ill-gotten gains plus interest and penalties, and officer-and-director bars against Camp and Peiffer. 

The SEC’s investigation was conducted by William Fiske, Peter Del Greco, Maria D. Rodriguez, and Marc Blau of the Los Angeles office, and the litigation will be led by Gary Leung and supervised by John W. Berry.  The SEC appreciates assistance from the Financial Industry Regulatory Authority.

SEC Press Release

SEC: Investment Adviser Boasted Phony Assets and Track Record, Stole From Client

The Securities and Exchange Commission today announced fraud charges against a San Francisco man and his investment advisory firm accused of pretending to manage millions of dollars in assets and then stealing money from the first client who invested with them based on their misrepresentations.

The SEC alleges that Nicholas M. Mitsakos and Matrix Capital Markets, which is a state-registered investment adviser in California, solicited investors in a purported hedge fund while falsely marketing themselves as experienced money managers with a highly successful track record.  They claimed assets under management in the millions when in fact they did not manage any client assets at all, and they fabricated a hypothetical portfolio of investments earning 20 to 66 percent annual returns and passed it off to investors as real trading.  When Mitsakos and Matrix Capital Markets were given $2 million in client assets to manage in September 2015, they proceeded to steal approximately $800,000 from that client and used most of it to pay for unauthorized personal and business expenses.

“We allege that Mitsakos and his firm tried to lure prospective investors with a mirage of assets under management and phony performance results, and when they finally won some actual business from a client, they proceeded to steal a large portion of it,” said Andrew M. Calamari, Director of the SEC’s New York Regional Office.  “Whenever pitched an investment opportunity with claims of lofty historical performance, it’s important for investors to take the time to verify the information and make sure they’re getting the truth before deciding to invest.”

In a parallel action, the U.S. Attorney’s Office for the Southern District of New York today announced criminal charges against Mitsakos.

The SEC’s complaint was filed in U.S. District Court for the Southern District of New York and charges Mitsakos and Matrix Capital Markets with violating the antifraud provisions of the federal securities laws.  Mitsakos also is charged with aiding and abetting Matrix Capital’s violations.  The SEC seeks permanent injunctions and disgorgement of ill-gotten gains plus penalties.

The SEC’s continuing investigation is being conducted by Alison R. Levine, Kerri Palen, Alex Janghorbani, and Valerie A. Szczepanik, and the case is supervised by Lara S. Mehraban.  The litigation will be led by Alex Janghorbani and Alison R. Levine.  The SEC appreciates the assistance of the U.S. Attorney’s Office for the Southern District of New York.

SEC Press Release

SEC Charges Stockbroker and Friend With Insider Trading

The Securities and Exchange Commission today charged a stockbroker and his friend with participating in an insider trading scheme to profit in advance of two major announcements out of a pharmaceutical company. 

The SEC alleges that Paul T. Rampoldi coordinated the insider trading with two other brokers at his firm as well as a then-IT executive at Ardea Biosciences.  The Ardea employee tipped one of the brokers ahead of the company’s announcement of an agreement to license a cancer drug and later tipped him in advance of its acquisition by AstraZeneca PLC.  The SEC charged the other two brokers and the Ardea employee last year.

According to the SEC’s complaint filed in federal court in San Diego today against Rampoldi and William Scott Blythe III, they made approximately $90,000 in illicit profits by trading ahead of those announcements based on nonpublic information that flowed to them through one of the fellow brokers who learned it from the other after he was tipped by the IT executive.  It was decided that in order to evade detection by the compliance department at the brokerage firm where Rampoldi and the others worked, Blythe would fund the purchase of Ardea call option contracts in a brokerage account he held at a different brokerage firm, and they would subsequently divide the profits among them.

“As a stockbroker, Rampoldi should have known better than to allegedly trade on tips about significant corporate events before they were announced,” said Sharon B. Binger, Director of the SEC’s Philadelphia Regional Office.  “We further allege that Rampoldi and Blythe tried to evade detection by hiding their trading elsewhere, but to no avail.”

In a parallel action, the U. S. Attorney’s Office for the Southern District of California today brought criminal charges against Rampoldi and Blythe.

The SEC’s complaint charges Rampoldi and Blythe with violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5.  The SEC seeks permanent injunctions as well as disgorgement, interest, and penalties.

The SEC’s investigation was conducted by Patricia A. Paw, John S. Rymas, Daniel Koster, and Brendan P. McGlynn of the Philadelphia office, and supervised by G. Jeffrey Boujoukos.  The litigation will be led by David L. Axelrod and Michael J. Rinaldi.  The SEC appreciates the assistance of the U. S. Attorney’s Office for the Southern District of California, Federal Bureau of Investigation, and Financial Industry Regulatory Authority.

SEC Press Release

SEC Charges Cardiologist With Insider Trading on Confidential Drug Trial Developments

The Securities and Exchange Commission today charged a cardiologist with insider trading on confidential developments as he worked on a clinical drug trial.   

The SEC alleges that Dr. Edward Kosinski of Weston, Connecticut, traded in advance of two negative news announcements by Regado Biosciences, which was pursuing a drug called REG-1 to regulate clotting in patients undergoing coronary angioplasty.  Kosinski, who served as principal investigator of the drug trial, got advance notice that patient enrollment in the trial was being suspended because patients had experienced severe allergic reactions.  He allegedly sold all 40,000 shares of his Regado stock the following day to avoid approximately $160,000 in losses when the news became public and the stock price dropped.  A month later, Kosinski received advance notice that enrollment would be permanently halted because a patient had died, and he profited through options trades by betting the stock price would drop again.  Kosinski allegedly made more than $3,000 when he exercised the options after the company’s stock fell by 60 percent upon the negative news.

“We allege that Dr. Kosinski illegally sold all of his stock in the company to avoid thousands of dollars in losses when the bad news came out,” said Joseph Sansone, Co-Chief of the SEC Enforcement Division’s Market Abuse Unit.  “Not content with avoiding heavy losses, Kosinski allegedly further enriched himself by placing options trades to profit when the company’s stock price dropped again on more bad news.”

In a parallel case, the U.S. Attorney’s Office for the District of Connecticut today announced criminal charges against Kosinski.

The SEC’s complaint filed in federal court in Connecticut charges Kosinski with violating antifraud provisions of the federal securities laws and related rules. 

The SEC’s investigation was conducted by Andrew J. Palid and Michele T. Perillo of the Market Abuse Unit in the Boston Regional Office, and the litigation will be led by Deena R. Bernstein.  The SEC appreciates the assistance of the U.S. Attorney’s Office for the District of Connecticut, Federal Bureau of Investigation, and Financial Industry Regulatory Authority.  

SEC Press Release