U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 20496 / March 14, 2008
Securities and Exchange Commission v. Ryan M. Reynolds, et al., Case No. 3-08 CV-438-G (N.D. Tex.)
SEC Obtains Emergency Relief Against Stock Promoters and Alleges Fraud and Registration Violations Against Beverage Creations, Inc.
The Securities and Exchange Commission announced today that on March 13, 2008, it obtained emergency relief against stock promoters Ryan M. Reynolds, Jason Wynn, Carlton Fleming, and their companies Bellatalia, LP, Wynn Industries, LLC, and Thomas Wade Investments, LLC based on their roles in distributing the common stock of Beverage Creations, Inc. The Honorable A. Joe Fish of the United States District Court for the Northern District of Texas entered a temporary restraining order (TRO) that temporarily enjoins defendants from violating Section 5 of the Securities Act of 1933. The TRO also temporarily enjoins defendants Jason Wynn and Wynn Industries, LLC from violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. Additionally, the TRO freezes the promoter defendants' assets and temporarily prohibits them from participating in any offering of penny stock.
The SEC's lawsuit, filed on March 13, also names as a defendant Beverage Creations, Inc., a Minneapolis, Minnesota company, alleging fraud as well as violations of the registration provisions of the federal securities laws. According to the complaint, Beverage Creations sold stock to the promoter defendants and then took steps to facilitate the promoters' prompt resale of the stock to the public without full disclosure. The stock promoters allegedly engaged in manipulative trading to create demand and push the price of the stock up. In addition, the SEC alleges that Jason Wynn and Wynn Industries pumped Beverage Creations' stock through promotional mailers and spam e-mail. While Wynn Industries disclosed in the mailer that it received stock, it did not disclose that it intended to sell that stock into the artificially inflated market created by its own activities. The promoters sold their shares at a profit of at least $2.4 million. Finally, the SEC alleges that, in a press release on February 21, 2008, Beverage Creations falsely disclaimed any relationship to Jason Wynn or Wynn Industries, even though it had sold more than $3 million shares of stock to Wynn Industries. The SEC alleges that, by these activities, all defendants violated Section 5 of the Securities Act, and Wynn, Wynn Industries, and Beverage Creations violated Section 10(b) of the Exchange Act and Rule 10b-5 thereunder.
In addition to the emergency relief already obtained, the SEC is seeking preliminary and permanent injunctions and civil penalties against all defendants and disgorgement of ill-gotten gains and penny stock bars from the promoter defendants. Ryan M. Reynolds and Bellatalia LLC are defendants in a prior action filed by the SEC, Securities and Exchange Commission v. Offill, et al., No. 3:07cv1643-D in the United States District Court for the Northern District of Texas (Judge Sidney A. Fitzwater).