SECURITIES ACT OF 1933
Release No. 7908 / September 29, 2000

SECURITIES EXCHANGE ACT OF 1934
Release No. 43400 / September 29, 2000

ADMINISTRATIVE PROCEEDING
File No. 3-10341

In the Matter of

LARRY H. WELTMAN,
Respondent.

ORDER INSTITUTING CEASE-AND-
DESIST PROCEEDINGS PURSUANT
TO SECTION 8A OF THE SECURITIES
ACT OF 1933 AND SECTION 21C OF
THE SECURITIES EXCHANGE ACT OF
1934, MAKING FINDINGS AND
IMPOSING A CEASE-AND-DESIST
ORDER

I.

The Commission deems it appropriate to institute public administrative proceedings pursuant to Section 8A of the Securities Act of 1933 (the "Securities Act") and Section 21C of the Securities Exchange Act of 1934 (the "Exchange Act") to determine whether Larry H. Weltman (the "Respondent") was a cause of violations of Securities Act Section 17(a), Exchange Act Section 10(b), and Exchange Act Rule 10b-5.

II.

In anticipation of the institution of these administrative proceedings, Respondent has submitted an Offer of Settlement which the Commission has determined to accept. Solely for

purposes of these proceedings and any other proceedings brought by or on behalf of the Commission or to which the Commission is a party, Respondent, without admitting or denying the matters set forth herein, consents to the issuance of this Order Instituting Cease-and-Desist Proceedings Pursuant to Section 8A of the Securities Act of 1933 and Section 21C of the Securities Exchange Act of 1934, Making Findings and Imposing a Cease-and-Desist Order ("the Order"), set forth below.

III.

The Commission finds the following:1

A. FACTS

1. Respondent

Larry H. Weltman resides in Thornhill, Ontario, Canada. He was Executive Vice President, Chief Financial Officer, and a director of Laser Friendly, Inc. during the relevant period and held those positions with Laser Friendly's successor entities, Gaming Lottery Corp., GLC Limited, and GalaxiWorld.com Limited. On December 21, 1999, Weltman's affiliation with GalaxiWorld.com ceased.

2. Laser Friendly, Inc.

During the relevant period Laser Friendly, Inc. was a Canadian company engaged in the business of printing on-line lottery tickets. The common stock of Laser Friendly traded on the Toronto Stock Exchange and the Nasdaq SmallCap Market.2

3. Related Civil Action Against Other Culpable Parties

On September 17, 1997, the Commission filed a civil enforcement action in the United States District Court for the Southern District of California charging six individuals (the "Fraud Defendants") with engaging in a fraudulent stock leasing scheme.3 The Commission's complaint alleged, in essence, that the Fraud Defendants obtained worthless stock certificates from a number of small public companies, including Laser Friendly, and then used those certificates to fraudulently obtain property, money, or credit from third parties. To effectuate their scheme, the Fraud Defendants, acting on behalf of various trusts and corporate entities, entered into substantially similar "subscription" or "asset contribution" agreements with each of the public companies. The agreements typically committed the public company to provide the Fraud Defendants with stock certificates purporting to represent millions of restricted shares of the company's common stock in exchange for large monthly or up-front payments to the company and the Fraud Defendants had an option to tender full payment for the shares a year later subject to the consent of the public companies.

The terms of the agreements placed so many restrictions on the stock that the stock had no economic value if legitimately held in accordance with the agreements. For example, the agreements purported to prohibit the Fraud Defendants from voting the shares or from selling, transferring, or otherwise disposing of the stock in any way. Moreover, although the agreements purported to give the Fraud Defendants an option to buy the stock after a year by tendering full payment of principal, the agreements typically allowed the issuer to reject the Fraud Defendants' tender, take back the shares, and keep all of the monthly payments made during the one-year period. The agreements also provided that the stock certificates would bear only Regulation S legends.4 Such legends did not provide adequate notice to third parties of the severe additional restrictions imposed by the agreements.

4. Respondent's Involvement and the Consequences

In November and December, 1994, Respondent Weltman, acting on behalf of Laser Friendly, signed two subscription agreements by which Laser Friendly provided certain of the Fraud Defendants with a total of 45 million restricted shares of its stock (approximately three times the stock it then had outstanding) in exchange for the promise of 12 monthly payments totaling $800,000 per month. In accordance with the terms of the subscription agreements, the Laser Friendly stock certificates bore legends stating that the shares were being transferred pursuant to Regulation S and could not be offered, sold, or transferred until November 15, 1995, but did not contain any specific notice about the further restrictions imposed by the subscription agreements. Under the subscription agreement, the Laser Friendly stock certificates were to be held in escrow by a depository institution or attorney during the term of the agreement.

In contravention of these provisions, in or about late November or early December 1994, the Fraud Defendants who received the restricted Laser Friendly stock pursuant to the terms of the subscription agreements, subsequently subleased a portion of that stock to another one of the Fraud Defendants, who in turn pledged those shares, along with similarly obtained shares of seven other issuers, as collateral to secure a $5 million line of credit from Bank Leu, a Swiss Bank. That line of credit was drawn down in excess of $4 million, and the Fraud Defendant who borrowed the funds defaulted on his obligation to repay the loan.

Certain of the Fraud Defendants subsequently bundled a portion of the remaining Laser Friendly stock with similarly obtained stock of other issuers and deposited the stock into an account at Dean Witter Reynolds. The Fraud Defendants attempted to persuade Dean Witter to issue a letter falsely stating that the securities were held "free and clear for disposition." When their attempt to dupe Dean Witter failed, the Fraud Defendants deposited the certificates into an account at Omni Bank in Detroit in an attempt -- also unsuccessful -- to obtain loans using the stock as collateral. The Fraud Defendants also entered into agreements to sublease millions of shares of the Laser Friendly stock to an entity called FirstVest Capital Corp., which attempted to use the stock as collateral to obtain credit. Laser Friendly received a total of $30,000 in payments from the Fraud Defendants under the terms of the subscription agreements.

B. LEGAL DISCUSSION

Securities Act Section 8A and Exchange Act Section 21C both authorize the Commission, upon finding that any person has violated any provision of either act or the rules and regulations thereunder, to issue an order requiring "any person that is, was, or would be a cause of the violation, due to an act or omission the person knew or should have known would contribute to such violation, to cease and desist from committing or causing such violation and any future violation of the same provision, rule or regulation." The decision of Weltman to participate in the subscription agreements led to millions of shares of Laser Friendly stock entering the stream of commerce and being used by the Fraud Defendants in violation of Securities Act Section 17(a), Exchange Act Section 10(b), and Exchange Act Rule 10b-5.

IV.

FINDINGS

Based on the above, the Commission finds that within the meaning of Securities Act Section 8A and Exchange Act Section 21C the Respondent was a cause of violations of Securities Act Section 17(a), Exchange Act Section 10(b), and Exchange Act Rule 10b-5.

V.

ORDER

Accordingly, IT IS HEREBY ORDERED, pursuant to Securities Act Section 8A and Exchange Act Section 21C, that Respondent Larry H. Weltman cease and desist from causing any violation and any future violation of Securities Act Section 17(a), Exchange Act Section 10(b), and Exchange Act Rule 10b-5.

By the Commission.

Jonathan G. Katz

Secretary


Footnotes

1 The findings herein are made pursuant to Weltman's Offer and are not binding on any other person or entity in this or any other proceeding.
2 The company changed its name from Laser Friendly, Inc. to Gaming Lottery Corp. in 1995, from Gaming Lottery Corp. to GLC Limited in 1998, and from GLC Limited to GalaxiWorld.com Limited in 1999. On December 21, 1999 GalaxiWorld.com was acquired by tender offer by Ostel Management and on that same day GalaxiWorld.com's shares were delisted from Nasdaq and ceased trading.
3 The six individuals charged as Fraud Defendants are Charles Anthony Ferracone, James W. Farrell, James L. Ericksteen, Gary L. Moore, Jill Hall, and Guido Bensberg. SEC v. Ferracone, et al., No. 97CV1684-TW (S.D. Cal. filed Sept. 17, 1997). Neither Laser Friendly, Inc. nor the Respondent is alleged to be one of the Fraud Defendants.
4 The Laser Friendly Regulation S legend provided as follows:

THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933 (THE "ACT"), HAVE NO VOTING RIGHTS AND ARE BEING TRANSFERRED PURSUANT TO AN EXEMPTION UNDER REGULATION S. UNTIL NOVEMBER 15, 1995 NO SHARES OF THE STOCK MAY BE OFFERED, SOLD OR TRANSFERRED. OFFERS, SALES OR TRANSFERS IN THE UNITED STATES OR TO A UNITED STATES PERSON (AS DEFINED IN REGULATION S PROMULGATED UNDER THE ACT) OR FOR THE ACCOUNT AND BENEFIT OF A UNITED STATES PERSON ARE NOT PERMITTED, EXCEPT AS PROVIDED IN SAID REGULATION S UNLESS THE SHARES ARE REGISTERED UNDER THE ACT OR WITH THE PRIOR CONSENT OF LASER FRIENDLY INC. PURSUANT TO AN APPLICATION EXEMPTION FROM SUCH REGISTRATION UNDER THE ACT.