U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 21841 / February 7, 2011
Securities and Exchange Commission v. Wall Street Capital Funding LLC, Philip Cardwell, Roy Campbell, and Aaron Hume, Civil Action No. 11-cv-20413-DLG (S.D. Fla. February 7, 2011)
On February 7, 2011, the Securities and Exchange Commission filed a civil action in the United States District Court for the Southern District of Florida charging the stock-promotion company Wall Street Capital Funding LLC (WSCF), its owners Philip Cardwell and Roy Campbell, and their associate Aaron Hume with disseminating fraudulent information concerning a series of sham energy companies.
The complaint alleges that the defendants created and distributed various forms of promotional material for, among other issuers, a purported oil-exploration-and-development company known as PrimeGen Energy Corp. PrimeGen claimed to be headquartered in New Jersey and to have active operations in Russia. According to its press releases, PrimeGen supposedly brought at least twelve oil wells into production in 2009 and generated many millions of dollars in revenues. The complaint alleges, however, that PrimeGen was phony: its corporate headquarters were a rented mailbox in a UPS Store opened with a do-not-forward instruction; its phone line was unattended; and its web page was generated by copying the source code from another company's web site.
According to the SEC's complaint, the defendants' promotional materials took the form of "investment opinions" sent to newswires, mass emails sent to as many as fifty million addresses at once, and other forms of electronic communication. The defendants' materials typically expressed positive opinions about penny-stock companies, their revenues, and the future direction of their stock price. The complaint alleges, however, that defendants had no reasonable basis for their opinions, yet at the same time falsely created the appearance of an independent basis for their statements about the penny-stock companies. Moreover, the complaint alleges that even when the defendants received ample warning signs that a scam was afoot, they always did the same thing: they closed their eyes and published.
The complaint alleges that WSCF, Cardwell, Campbell, and Hume violated Section 17(a) of the Securities Act of 1933 (Securities Act), that WSCF, Cardwell, and Campbell directly violated Section 10(b) of the Securities Exchange Act of 1934 (Exchange Act) and Rule 10b-5 thereunder, and that Cardwell, Campbell, and Hume violated Section 10(b) of the Securities Exchange Act of 1934 (Exchange Act) and Rule 10b-5 thereunder as aiders and abettors. The complaint further asserts that Cardwell and Campbell are liable as control persons for WSCF's violations of the Exchange Act.
The SEC's complaint seeks a final judgment permanently enjoining the defendants from future violations of the federal securities laws and ordering them to pay civil penalties and disgorgement of ill-gotten gains plus prejudgment interest.