U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 20662 / July 30, 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 trader receives 36 month sentence for orchestrating wash sales and matched orders in Spam-Fueled Pump-and-Dump Schemes
The Securities and Exchange Commission today announced that on July 25, 2008, Lawrence Kaplan was sentenced by the Hon. Gerald Bruce Lee of the Eastern District of Virginia to 36 months of incarceration for conspiracy to commit securities fraud, with 12 months to be served in community confinement. Kaplan was also ordered to pay restitution to the victims of his crime in the amount $7,333,384.21.
On July 25, 2007, Kaplan pleaded guilty to one count of conspiracy to commit securities 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 Kaplan and Mesa, Arizona-based recidivist securities law violator Michael Saquella, a.k.a., Michael Paloma, conducted an elaborate market manipulation scheme that involved unlawfully taking public seven microcap companies, artificially inflating their share prices, and dumping millions of shares into the public market. On March 14, 2008, Saquella was sentenced to serve ten years in federal prison for orchestrating the scheme.
According to the Commission's complaint, Saquella 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, Saquella and Kaplan coordinated wash sales and matched orders to artificially inflate the price of each issuer’s stock while also creating the appearance of an active trading market. Saquella then coordinated the dissemination of millions of false and/or misleading blast fax and spam e-mails touting the companies' shares. Kaplan realized profits of some $677,632 by dumping shares of the microcap issuers into the public market at prices artificially inflated by his manipulative trading as well as the spam campaigns. The Commission alleged that Saquella 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, Kaplan consented to the entry of a final judgment (1) permanently enjoining him from violating Section 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 $677,632 in unlawful profits, plus prejudgment interest of $121,127.