U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 20443 / January 28, 2008
Securities and Exchange Commission v. Robert F. Gruder and Stinger Systems, Inc., Civil Action No. 1:08-CV-0294 (NDGA January 28, 2008)
The Securities and Exchange Commission ("Commission") announced today that it filed a Complaint in the United States District Court for the Northern District of Georgia against Stinger Systems, Inc. ("Stinger") and Robert F. Gruder ("Gruder"). Stinger is a Nevada corporation based in Tampa, Florida. Gruder, who resides in Tampa, is the president of Stinger.
The Complaint alleges that from October 2004 through March 2005, Stinger and Gruder made a series of material misrepresentations and omissions regarding Stinger's "flagship" stun gun product. According to the Complaint, the misrepresentations consisted of press releases and direct mailings to thousands of law enforcement officers and agencies, suggesting that Stinger was manufacturing, selling and shipping its stun gun. In fact, the product was still in the development phase. The Complaint further alleges that the misrepresentations also consisted of statements on the Stinger's website and/or in industry publications that indicated Stinger's stock was trading on NASDAQ, when in fact it was not. The Complaint also alleges that Stinger and Gruder misrepresented that the Bureau of Alcohol, Tobacco and Firearms ("ATF") certified Stinger's stun gun, even though the ATF offers no such certification. According to the Complaint, these misrepresentations caused a spike in the trading volume and price for Stinger's shares once it began publicly trading in November 2004. On November 12, 2004, the first full day of trading, Stinger's stock price rose by 340%, from $1.25 to $5.50. On November 15, 2004, the next trading day, after Stinger announced that it anticipated shipping its stun gun products in January 2005, the stock price increased by an additional 55% to $8.50. By November 17, 2004, the stock price closed at $19.25.
The Complaint alleges that Stinger and Gruder violated Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The Commission seeks: (i) permanent injunctions against future violations; (ii) imposition of civil penalties; (iii) an order permanently prohibiting Gruder from acting as an officer or director of any company that has a class of securities registered with the Commission; and (iv) an order barring Gruder from participating in any offering of a penny stock.