U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 22006 / June 20, 2011
Securities and Exchange Commission v. David Ronald Allen, et al., Civil Action No. 3:11-CV-882-O (N.D. Tex.)
SEC CHARGES ADDITIONAL FRAUD IN CASE INVOLVING PONZI SCHEME BY CO-FOUNDER OF CHINA VOICE HOLDING CORP.
On June 20, 2011, the Commission filed an amended complaint in the U.S. District Court for the Northern District of Texas (Dallas Division) in its case against the co-founder of China Voice Holding Corp., David Ronald Allen, and multiple other defendants. The SEC’s amended complaint charges China Voice, Allen, and William F. Burbank IV (China Voice’s former chairman and CEO) with reconstituting former subsidiaries of China Voice at Voice One Corp. without informing China Voice investors.
On April 28, 2011, the SEC filed a complaint in federal court in Texas, alleging that Allen, Burbank, and China Voice engaged in a series of false and misleading statements and material omissions to investors about China Voice’s financial condition. Today’s complaint alleges that this fraudulent behavior extended to renaming two China Voice subsidiaries and reconstituting them at Voice One and that Allen and Burbank are now involved in running Voice One.
Also as alleged in the SEC’s original complaint, Allen, with the assistance of two associates, launched what became an ongoing fraud that sought to raise at least $8.6 million from investors, telling them that their funds would be used to make loans to profitable businesses with demonstrated track records. The Commission alleged that contrary to what investors were told, proceeds were used to pay back earlier investors; to make payments to Allen and his associates; and to make payments to Allen-affiliated businesses, including China Voice. Today’s amended complaint alleges that Allen also used investor funds to make payments to Voice One, contradicting the disclosures made to investors. The amended complaint also names as a defendant yet another company used by Allen to help carry out the fraud on investors.
The SEC’s amended complaint charges Allen, Alex Dowlatshahi, Christopher Mills, and various related companies with violations of 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. The SEC’s amended complaint also charges China Voice, Burbank, and Allen for a series of fraudulent statements about China Voice’s financial condition and business prospects, as well as Gerald Patera, Ilya Drapkin, and Robert Wilson for their roles in the scheme, including violations of Section 17(a) of the Securities Act and Section 10(b) of the Securities Exchange Act and Rule 10b-5 thereunder. In addition to the preliminary relief, the SEC’s amended complaint seeks permanent injunctions, disgorgement, prejudgment interest, and financial penalties against all defendants, as well as penny stock bars against Allen, Burbank, Patera, Drapkin, and Wilson, and officer and director bars against Allen and Burbank.
The SEC’s investigation is ongoing.