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U.S. SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 22854 / October 23, 2013

Securities and Exchange Commission v. Zhou, Civil Action No. 12-Civ-8987 (S.D.N.Y. July 30, 2012) (RA)

SEC Obtains Final Judgment Against New Jersey-Based Consultants to Chinese Reverse Merger Companies

The United States Securities and Exchange Commission announced today that the Honorable Ronnie Abrams of the United States District Court for the Southern District of New York entered a final judgment against defendants Huakang Zhou (a/k/a David Zhou) and Warner Technology and Investment Corporation on October 18, 2013. The judgment permanently enjoins Zhou and Warner Investment from violating Sections 5 and 17(a) of the Securities Act of 1933, Sections 10(b), 13(d), 15(a), and 16(a) of the Securities Exchange Act of 1934, and Rules 10b-5, 13d-1, 13d-2, and 16a-3 thereunder.

Zhou and Warner Investment agreed to pay more than $1.4 million to settle the SEC's charges. Zhou and Warner Investment consented to the entry of judgment, without admitting or denying the allegations, and are liable to pay disgorgement in the amount of $983,375 plus prejudgment interest thereon in the amount of $82,449, and Zhou is liable to pay civil penalties in the amount of $400,000. The Commission's complaint alleged that Zhou and Warner Investment, consultants to numerous Chinese reverse merger companies, in connection with such work for various clients from 2007 through at least 2010, engaged in a scheme to list one client on a national securities exchange through manipulative trading and by facilitating in effect an artificial shareholder base sufficient for listing. Further, the complaint alleged that Zhou and Warner Investment made material misstatements and omissions in connection with an offering for another client through the misuse of proceeds. The complaint also alleged that Zhou and Warner Investment did not disclose certain holdings and transactions; sold unregistered securities; and acted as unregistered brokers and aided and abetted others' unregistered broker activity.

Based on the final judgment, the Commission issued an Order Instituting Administrative Proceedings Pursuant to Section 15(b) of the Securities Exchange Act of 1934, Making Findings, and Imposing Remedial Sanctions that bars Zhou and Warner Investment by consent from association with any investment adviser, broker, dealer, municipal securities dealer, municipal advisor, transfer agent, or nationally recognized statistical rating organization, and from participating in any offering of a penny stock, with the right to apply for reentry after five years.

The Commission also previously brought several other actions stemming from its investigation into China Yingxia International, Inc., with one civil injunctive action still pending. For more information on matters relating to China Yingxia, see Litigation Release 22430 (July 30, 2012) and Litigation Release 22704 (May 20, 2013).

 

http://www.sec.gov/litigation/litreleases/2013/lr22854.htm


Modified: 10/23/2013