U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 20293 / September 24, 2007
Securities and Exchange Commission v. Paul Harary and Douglas Zemsky, Civil Action No. 07-80875-CIV (S.D. Fla., Sept. 24, 2007)
S.E.C. Charges Two with Securities Fraud in $4.4 Million Market Manipulation and Kickback Case
Guilty Plea Entered in Parallel Criminal Case
The Securities and Exchange Commission today filed a settled complaint against Florida residents Paul Harary, 43, and Douglas Zemsky, 44, for their involvement in an alleged $4.4 million market manipulation and kickback scheme that defrauded customers of a Boca Raton brokerage firm.
The SEC complaint alleges that in 2004 and 2005:
According to the complaint, the two shell companies were Secure Solutions Holdings, Inc. (SSLX) and American Financial Holdings, Inc. (AFHJ). Each traded on the over-the-counter market and was quoted on the Pink Sheets.
Without admitting or denying the allegations in the complaint, Harary and Zemsky consented to the entry of final judgments: (1) permanently enjoining each from violating the antifraud and securities registration provisions of the federal securities laws; (2) imposing penny stock bars against each; (3) imposing an officer and director bar against Zemsky; and (4) directing Harary to pay approximately $4 million and Zemsky to pay approximately $97,000 in disgorgement and prejudgment interest.
Previously, on July 15, 2005, the Commission issued an Order suspending trading in SSLX common stock for ten days because of questions about the accuracy of representations in SSLX's press releases concerning, among other things, the identity of the management and directors of the company and the status of its corporate organization. See Securities Exchange Act of 1934 Release No. 52037 (July 15, 2005).
The U.S. Attorney for the District of Columbia simultaneously announced that Harary pleaded guilty to conspiracy to commit mail and wire fraud in a parallel criminal action brought in the United States District Court for the District of Columbia. See United States v. Harary, Crim. No. 07-Cr.-209 (EGS) (D.D.C.).
The Commission acknowledges the assistance of the U.S. Attorney's Office for the District of Columbia, the Federal Bureau of Investigation, the United States Postal Inspection Service, NASD (now known as the Financial Industry Regulatory Authority), and the British Columbia Securities Commission.
The Commission's investigation in this matter is ongoing.
The Commission has published guidance for investors concerning investments in microcap stocks. See: http://www.sec.gov/investor/pubs/microcapstock.htm.