U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 20617 / June 13, 2008
Securities and Exchange Commission v. Joshua M. Eudowe, United States District Court for the Southern District of New York, Civil Action No. 08 CV 5386 (HB)
SEC Settles Enforcement Action Against Joshua M. Eudowe
The Securities and Exchange Commission filed a settled enforcement action today in the U.S. District Court for the Southern District of New York against Joshua M. Eudowe alleging that he purchased, without authorization, several thousand shares of thinly-traded stocks in the client accounts of his employer, and then sold several thousand shares of these same stocks that he held in his personal account at the artificially inflated prices caused by his unauthorized trading. At the time of his unauthorized trading, Eudowe worked for a registered representative with FINRA, who was also the principal of a registered brokerage firm and several investment partnerships.
The Commission alleges in its complaint that, from December 26 through December 29, 2006, Eudowe engaged in a fraudulent trading scheme whereby he made five unauthorized purchases of two thinly-traded stocks, FRMO Corp. ("FRMO") and CreditRiskMonitor.com, Inc. ("CRMZ"), in the client accounts of investment partnerships managed by his employer. The complaint further alleges that Eudowe used his employer's private password, without his employer's knowledge or consent, to place market orders to purchase several thousand shares of FRMO and CRMZ in the client accounts of his employer. According to the complaint, Eudowe's unauthorized trading caused the stock prices of FRMO and CRMZ to spike, with both stocks exceeding 52-week highs. The complaint further alleges that Eudowe then sold several thousand shares of FRMO and CRMZ from his personal brokerage account at the inflated prices caused by his trading, thereby profiting from his scheme.
Eudowe, without admitting or denying the allegations in the complaint, has consented to the entry of a final judgment permanently enjoining him from committing future violations of Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Exchange Act Rule 10b-5. The final judgment also requires Eudowe to pay $8,059 of disgorgement, pre-judgment interest of $766 and a $50,000 civil penalty, for a total payment of $58,825.