U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 20502 / March 19, 2008
Securities and Exchange Commission v. Michael Saquella, a.k.a. Michael Paloma, and Lawrence Kaplan, Civil Action No. 1:07CV895 (BRP) (E.D. Va.)
Stock Promoter receives 10-year sentence for orchestrating Spam-Fueled Pump-and-Dumps of unregistered offerings.
The Securities and Exchange Commission today announced that on March 14, 2008, Michael Saquella, a.k.a. Michael Paloma, was sentenced to serve ten years in federal prison consisting of 60 months for conspiracy to commit securities fraud and 60 months for conspiracy to commit electronic mail fraud. Paloma was also ordered to pay restitution to the victims of his crime in the amount $7,806,303.58.
On August 20, 2007, Paloma pleaded guilty to one count of conspiracy to commit securities fraud and one count of electronic mail fraud. The criminal case was prosecuted by the U.S. Attorney's Office for the Eastern District of Virginia. In a related case, on September 17, 2007, the Commission filed a complaint in U.S. District Court for the Eastern District of Virginia, alleging that, over the past four years, Paloma repeatedly passed himself off to principals of private, cash-strapped companies as a legitimate financier, persuading company principals to issue to Paloma-affiliated entities large controlling blocks of stock, which were then resold in unlawful public offerings.
According to the Commission's complaint, Paloma repeatedly circumvented the registration requirements of the federal securities laws in order to obtain large blocks of purportedly free trading shares. With the "free trading shares" in hand, Paloma coordinated manipulative trading to artificially inflate the value of each issuer's stock while also creating the appearance of an active trading market. Paloma then coordinated the dissemination of millions of false and/or misleading blast fax and spam e-mails touting the companies' shares. Paloma realized profits of some $2,155,000 by dumping shares of the microcap issuers into the public market at prices artificially inflated by his manipulative trading and spam campaigns. The Commission alleged that Paloma carried out versions of this scheme using the shares of Courtside Products, Inc., Latin Heat Entertainment, Inc., Xtreme Technologies, Inc., PokerBook Gaming Corp., Commanche Properties, Inc., TKO Holdings Ltd. and Motion DNA Corp.
In the Commission's action, Paloma consented to the entry of a final judgment (1) permanently enjoining him from violating Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933, and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder; (2) imposing a penny stock bar against him; and (3) directing that he disgorge $2,155,034 in unlawful profits, plus prejudgment interest of $364,265.
Additional information can be found in Litigation Release No. 20269 (September 6, 2007); and Securities Act of 1933 Release No. 8892 (February 7, 2008).