U.S. Securities and Exchange Commission
Litigation Release No. 18157 / May 27, 2003
Securities and Exchange Commission v. Amplidyne, Inc. and Devendar S. Bains, Civil Action No. 03 Civ 2425 (GEB) (D.N.J.) (filed May 22, 2003)
SEC Files Fraud Charges against Amplidyne, Inc. and Its Chief Executive Officer, Devendar S. Bains
On May 22, 2003, the Commission filed a settled action in the United States District Court for the District of New Jersey against Amplidyne, Inc. ("Amplidyne") and its President, Chairman and Chief Executive Officer, Devendar S. Bains ("Bains"). The Commission's Complaint alleges that Amplidyne and Bains violated the antifraud provisions of the federal securities laws by making false and misleading statements concerning Amplidyne's purported entry into the high-speed Internet wireless access market.
The Commission's Complaint alleges that on September 9, 1999, Amplidyne issued a press release, drafted and approved by Bains, announcing that it had developed, and was offering for sale, a new set of products to provide high-speed Internet access many times faster than certain existing dial-up services. The press release was materially false and misleading because Amplidyne did not have this new set of products available for sale. Specifically, Amplidyne had not even obtained two of the three essential components that comprised the new set of products. Amplidyne was weeks, if not months, away from being able to assemble, field-test, demonstrate and ship the new set of products to customers. In addition, Amplidyne could not legally offer to sell or even market the new set of products under Federal Communications Commission ("FCC") regulations.
The Complaint alleges that after the press release was issued on September 9, 1999, Amplidyne's stock price more than tripled, rising to $10.25 relative to the previous day's closing price of $3.125. Trading volume in Amplidyne stock also increased dramatically, rising from 211,500 shares traded the day before the press release, to more than 17 million shares traded on September 10, 1999.
The Commission's Complaint also alleges that Bains, during CNBC's "Squawk Box" program on September 14, 1999, falsely stated that the new set of products had been successfully field-tested over a 50-mile distance and that Amplidyne was ready to sell it. In reality, Amplidyne had never field-tested the products, there was no evidence that the products would work as Bains claimed, and Amplidyne did not have a finished set of products ready to sell.
Simultaneously with the filing of the Complaint, Amplidyne and Bains, without admitting or denying the allegations in the Complaint, consented to the entry of a final judgment permanently enjoining both from violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. In addition, Bains agreed to pay a civil penalty of $50,000.
The Commission thanks the FCC for its cooperation and assistance in this matter.