U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 19645 / April 7, 2006
Accounting and Auditing Enforcement
Release No. 2408 / April 7, 2006
SECURITIES AND EXCHANGE COMMISSION v. EXOTICS.COM, INC., ET AL., (United States District Court, District of Nevada, C.A. No. CV-S-05-0531-PMP-GWF)
FINAL JUDGMENT AGAINST EXOTICS.COM, INC. IN MARKET MANIPULATION AND FINANCIAL FRAUD CASE
The Securities and Exchange Commission announced today that, on March 29, 2006, a federal district court in Nevada entered a final judgment of default against Exotics.com, Inc. in connection with a stock manipulation and accounting fraud scheme that occurred from 1999 to 2002. The final judgment permanently enjoins Exotics.com from violating the antifraud, securities registration, books and records, internal controls and reporting provisions of the federal securities laws.
In April 2005, the Commission filed a civil fraud action against Exotics.com, a Nevada corporation based in Vancouver, British Columbia, and 12 other defendants and one relief defendant involved in the fraudulent scheme. Exotics.com owns, operates and licenses adult Web sites in major cities throughout the United States and abroad. In its complaint, the Commission alleged that Exotics.com filed reports with the Commission containing material misstatements and omissions between February 2000 and August 2002, issued a false and misleading press release in March 2001 and caused false and misleading spam e-mails and faxes to be disseminated in December 2001. The complaint also alleged that Exotics.com issued stock without registration or a valid exemption in order to obtain loans and to further the scheme to manipulate its stock. According to the complaint, Exotics.com also failed to file required reports with the Commission, failed to maintain accurate books and records and failed to implement adequate internal accounting controls. The registration of Exotics.com's securities with the Commission was terminated voluntarily by the company in May 2004.
The final judgment enjoins Exotics.com from violating the antifraud provisions of the federal securities laws, Section 10(b) of the Securities Exchange Act of 1934 (Exchange Act) and Rule 10b-5 thereunder, the reporting, books and records and internal controls provisions, Sections 13(a), 13(B)(2)(A) and 13(B)(2)(B) of the Exchange Act and Rules 13a-1, 13a-11, 13a-13, 12b-20 and 12b-11 thereunder and the securities registration provisions, Sections 5(a) and 5(c) of the Securities Act of 1933. The litigation is continuing with regard to the remaining defendants and the relief defendant.
For further information, see Litigation Release Number 19207 (April 28, 2005).