U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 18584 / February 20, 2004
Securities and Exchange Commission v. Leon Levy, et al., Civil Action No. 3-04-CV-0351-N, United States District Court for the Northern District of Texas (Dallas Division).
SEC FILES EMERGENCY CIVIL ACTION AND OBTAINS ASSET FREEZE AGAINST ALLEGED INSIDE TRADERS
On February 19, 2004, the Commission filed an emergency action in United States district court in Dallas against six residents of Panama - Leon Levy, Yanni Abecassis, Ilan Sabbah, Henry Levy (aka Henry Levy Sakhai), Hertsel Levy, and Jacqueline Levy - charging that the defendants earned, in total, about $580,000 by purchasing stock of iDial Networks, Inc. (OTCBB:IDNW) while they were aware of material nonpublic information concerning iDial's August 23, 2003 merger with GlobalNet, Inc. The Commission simultaneously filed in the civil action, and the court granted, a motion seeking an asset freeze and other emergency relief against the six defendants and a single relief defendant - Atlantic 1 Corp. - in order to prevent the dissipation or concealment of assets that the Commission claims should be paid as civil money penalties and disgorgement of illegal profits.
In its complaint, the Commission alleged that, on August 4, 2003, defendants Yanni Abecassis and Leon Levy were present, as consultants to iDial, at iDial-GlobalNet merger negotiations in Panama, where they received material nonpublic information about the merger, as well as instructions from iDial's CEO to keep the information confidential. iDial is a Nevada corporation based in The Woodlands, Texas, and GlobalNet, a Nevada corporation, was, prior to the merger, a subsidiary of San Diego based Titan Corp. (NYSE:TTN); both companies were in the telecommunications business. The Commission alleged that Leon Levy, who was obligated to maintain the confidentiality of the merger negotiations, opened a brokerage account with an Irving, Texas based broker-dealer on August 7, 2003, and thereafter purchased 12,500,000 shares of iDial on the basis of the material nonpublic information that he received from iDial, prior to the public announcement of the merger on August 27, 2003. The Commission further alleged that, in early August 2003, Leon Levy and Abecassis, who was also obligated to maintain the confidentiality of the merger negotiations, improperly tipped defendant Ilan Sabbah about the impending merger, and, on the basis of that illegal tip, on August 8, 2003 Sabbah opened a brokerage account with the same Irving, Texas based broker-dealer through which Leon Levy traded, and thereafter purchased 12,050,000 shares of iDial before the public announcement of the merger. Finally, the Commission alleged that, early in August 2003, Leon Levy also tipped three other residents of Panama - Henry Levy, Henry's wife, Jacqueline Levy, and Henry's brother, Hertsel Levy - who then purchased in total over 12,000,000 shares of iDial stock before the merger was publicly announced.
In its action, the Commission charged the following defendants with violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder:
The Commission seeks, against each of those defendants, a permanent injunction, civil money penalties, and disgorgement of illegal profits with prejudgment interest.
The Commission also named in its complaint, as a relief defendant, the following corporation, against which the Commission sought disgorgement of illegal profits and prejudgment interest, based on the entity's unjust enrichment, through receipt of illegal insider trading profits from Leon Levy and Sabbah:
The Commission also filed a motion on February 19, seeking, against each of the defendants and the relief defendant, ex parte emergency relief, including an accounting, an asset freeze, an order prohibiting the destruction or alteration of documents and expediting discovery, and a repatriation order. The court granted all relief sought by the Commission in its motion.
The Commission gratefully acknowledges the assistance and cooperation of the National Association of Securities Dealers, which referred this matter to the Commission.