SEC v. Verdiramo

U.S. DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
Business Law

New York Law Journal

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Judge Richard Berman

In its Sept. 9, 2011, order the court found defendant Chen violated §5 of the Securities Act by selling 158,333 RECOV shares in unregistered transactions from July to Sept. 2005. The court's Jan. 13, 2012, order directed Chen to disgorge $40,284 and pay $16,453 in prejudgment interest. Chen disregarded an Oct. 4, 2012, order directing her Nov. 15, appearance to show cause why she should not be subjected to a permanent penny stock bar and ordered to pay a civil monetary penalty. Noting Chen's disregard of various court orders—including the magistrate judge's order to appear for deposition or face sanctions, including a possible default judgment—the court found a permanent penny stock bar appropriate. In so doing it found Chen's unregistered sales were intended to "camouflage an unregistered public distribution" of RECOV. It also found Chen recklessly disregarded §5's regulatory requirements. Chen signed a sham contract to buy a controlling interest in RECOV and was issued 333,333 RECOV shares despite the fact she made no payments. The court also found a civil monetary penalty pursuant to 15 USC §77t(d) appropriate. Determination of the penalty's amount was referred to the magistrate judge for hearing or inquest.

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