U.S. Securities and Exchange Commission
Litigation Release No. 18390 / October 3, 2003
SEC v. Brian Lee, Todd DiRoberto, Lonnie Dragon and Trevor Watson, Civ. Action No. 03CV - 1957 H (JFS) (Southern District of California)
Today, the Securities and Exchange Commission filed suit in the United States District Court for the Southern District of California against Brian Lee, Todd DiRoberto, Lonnie Dragon and Trevor Watson, all San Diego, California, for violations of the antifraud, securities registration, and broker-dealer registration provisions of the federal securities laws. Each of the defendants had previously been associated with Zandria Corp., a defunct Internet company previously located in San Diego.
In the suit, the Commission alleges that between November 1998 and September 2000, Lee, DiRoberto, Dragon and Watson offered more than $10 million in securities and raised approximately $6 million from more than 200 investors nationwide in two purported private placement offerings of stock in Zandria Entertainment Networks, Inc. ("ZEN") and LevelRed Investments, Inc. The Commission further alleges that the ZEN and LevelRed Investments offerings were fraudulent because, among other things, the defendants failed to disclose that Lee and DiRoberto, both convicted felons, owned and controlled ZEN. In addition, the Complaint alleges that the defendants used high-pressure, "boiler-room" sales tactics and failed to disclose to investors the full extent of their commissions and other fees, which exceeded forty percent.
The Complaint alleges that Lee, DiRoberto and Dragon violated Sections 5(a), 5(c) and 17(a) of the Securities Act and Sections 10(b) and 15(a) of the Exchange Act and Rule 10b-5 thereunder. The complaint further alleges that Watson violated Sections 5(a), 5(c) and 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder.