UNITED STATES OF AMERICA
: ORDER INSTITUTING
: ADMINISTRATIVE PROCEEDINGS
: PURSUANT TO SECTIONS 15(b)(6)
: AND 19(h) OF THE SECURITIES
: EXCHANGE ACT OF 1934,
: MAKING FINDINGS, AND IMPOSING
: REMEDIAL SANCTIONS
The Securities and Exchange Commission ("Commission") deems it appropriate in the public interest and for the protection of investors that public administrative proceedings pursuant to Sections 15(b)(6) and 19(h) of the Securities Exchange Act of 1934 ("Exchange Act") be, and hereby are, instituted against respondent Brian Walfish ("Walfish").
In anticipation of the institution of this proceeding, Walfish has submitted an Offer of Settlement ("Offer"), which the Commission has determined is in the public interest to accept. Solely for the purpose of this proceeding, and any other proceeding brought by or on behalf of the Commission or in which the Commission is a party, and without admitting or denying the findings set forth herein, except as to the fact that a Final Judgment By Default was entered against him as set forth in paragraph III.C. below, and the jurisdiction of the Commission over him and over the matters set forth in this Order Instituting Administrative Proceedings Pursuant To Sections 15(b) And 19(h) Of The Securities Exchange Act Of 1934, Making Findings, And Imposing Remedial Sanctions ("Order"), which he admits, Walfish consents to the entry of the findings and the imposition of the sanctions set forth in this Order.
On the basis of this Order and Walfish's Offer, the Commission finds that:
A. Walfish was born on September 3, 1973 and is a resident of Brooklyn, New York.
B. Walfish was associated from May 1997 to April 1998 as a registered representative with Wise Choice Discount Brokerage, Inc. ("Wise Choice"), a broker-dealer whose registration was canceled by the Commission in September 1998. Walfish's registration with the National Association of Securities Dealers was terminated in May 1998.
C. On March 26, 1998, the Commission filed a civil injunctive action against, among others, Walfish in the United States District Court for the Southern District of New York, SEC v. Nichi Capital, Ltd., et al., 98 Civ. 2218 (CSH) ( "Injunctive Action"). On June 30, 1999, the court entered a Final Judgment By Default ("Default Judgment") against Walfish. The Default Judgment provides that as a consequence of his default, Walfish is deemed to have admitted the allegations in the Commission's Complaint. The Default Judgment enjoins Walfish from future violations of Sections 5(a) and 17(a) of the Securities Act of 1933 ("Securities Act"), and Section 10(b) of the Exchange Act and Rules 10b-5 and 10b-9 thereunder, and orders him to disgorge $928,827.50 plus prejudgment interest of $75,337.55 and pay a civil penalty of $10,000.
D. The Complaint in the Injunctive Action alleged, among other things, that:
(1) From October 1997 through March 1998, Walfish fraudulently offered and sold unregistered stock of Nichi Capital, Ltd. ("Nichi"), a development stage company incorporated in New York, to investors both in a private placement and in a purported initial public offering ("IPO").
(2) Walfish solicited investors based on oral and written misrepresentations concerning the purported IPO. He told investors that they would be able to sell the Nichi stock in the public market at a substantial profit following the purported IPO, which Walfish represented was imminent. Walfish also told investors that if they invested in the purported IPO, their money would be held in escrow and returned unless Nichi raised a minimum amount of cash.
(3) These representations by Walfish were materially false and misleading. Although Nichi had filed a registration statement with the Commission for an IPO, it was not likely that the registration statement would soon become effective because Nichi had not responded to an outstanding comment letter from the Commission's Division of Corporation Finance. Walfish had no reasonable basis in fact to represent to investors that they would be able to sell their Nichi shares at a substantial profit following the purported IPO. Moreover, an escrow account in which to hold investors' funds was not established; instead, those funds were commingled with funds in the operating accounts of Nichi and Wise Choice.
(4) As a result of these fraudulent misrepresentations, Walfish and the other defendants obtained approximately $1 million from investors.
E. On October 15, 1999, Walfish pled guilty to one count of conspiracy to commit securities fraud in connection with conduct involving Nichi, as well as to three conspiracy counts in connection with conduct unrelated to Nichi. United States v. Bakal, et al., 98 Cr. 329 (TPG) (S.D.N.Y.).
In view of the foregoing, the Commission deems it appropriate in the public interest and for the protection of investors to accept Walfish's Offer and to impose the sanctions which are set forth in the Offer.
Accordingly, IT IS HEREBY ORDERED that:
Effective immediately, Walfish be, and hereby is, barred from association with any broker or dealer.
By the Commission.
Jonathan G. Katz
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