U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 19175 / April 7, 2005
Securities and Exchange Commission v. Mohamad Wael Ibrahim Elzein, individually and d/b/a Focus Mentors Elzein Management; Hussein Hassan El Zein; and Darin Raymond Knee, Civil Action No. 3:03-2843-24 (D.S.C.)
FEDERAL COURT GRANTS SUMMARY JUDGMENT, ORDERS CIVIL PENALTY, AND ENTERS FINAL JUDGMENT AGAINST DARIN RAYMOND KNEE
The Securities and Exchange Commission ("Commission") announced today that the Honorable Margaret B. Seymour, United States District Judge for the District of South Carolina, granted the Commission's motion for summary judgment and entered a final judgment against Darin Raymond Knee ("Knee") on April 6, 2005. The court permanently restrained and enjoined Knee from further 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 Court made specific findings of fact and conclusions of law regarding Knee's conduct in the fraudulent offer and sale of Focus Mentors securities, in the form of investment contracts. Knee was ordered to pay a civil penalty in the amount of $15,000.
The Court found that Mohamad Elzein, Hussein Hassan El Zein, and Knee, from approximately July through October 2001, raised in excess of $500,000 from investors in a fraudulent, unregistered offering of securities. The Court concluded that Knee made materially false and misleading statements and omissions in connection with the offer and sale of the investment contracts including, among other things, false historical returns, security of the investment, and that Knee promised rates of returns without a reasonable basis therefor. The Court also concluded that Knee took accurate information from the Focus Mentors principals, altered it to make it factually inaccurate, and that Knee thereafter promoted Focus Mentors on his MoneyJoe.com website and in his related electronic newsletter called "Insiders Club" in which he described Focus Mentors as a "secure opportunity" with "107% plus principal guaranteed" even though Knee had no reasonable basis for such statements. The Court also concluded that over 90% of Focus Mentors' securities investors came to that company through Knee's promotional efforts over his website and through his electronic newsletter. The Court also found that while Knee was entitled to receive a 5% sales commission plus an override, he never received payment of a commission from the company, and that Focus Mentors principals used Knee's commission funds to assist in repaying defrauded investors. As a result, the Court found that disgorgement was not appropriate, but ordered Knee to pay a $15,000 civil penalty within 30 days from the entry of the judgment. Final judgments were entered against Knee's codefendants, in earlier orders of the Court.