U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 19471 / November 18, 2005
Securities and Exchange Commission v. Allixon International Corp., et al. , Civil Action No. 3:05-CV-2260-P, United States District Court for the Northern District of Texas (Dallas Division).
SEC FILES EMERGENCY CIVIL ACTION, OBTAINS TEMPORARY RESTRAINING ORDER AND ASSET FREEZE FOR UNREGISTERED STOCK DISTRIBUTION BY ALLIXON INTERNATIONAL CORP.
On November 17, 2005, the Commission filed an emergency civil action in United States District Court in Dallas, Texas, seeking to halt an ongoing, unregistered distribution of the common stock of Allixon International Corp. The suit alleges that in July 2005, a Turks & Cacios B.W.I. securities firm and its principal officer, through two affiliated offshore entities, acquired 94% of the supposedly freely tradeable shares of Allixon, a Delaware corporation based in South Korea, for $13,000. Since August 29, 2005, the Turks & Cacios firm and its principal officer have publicly sold approximately one million Allixon shares, on a continuing basis, into the market through a U.S. brokerage firm in Dallas, Texas, for approximately $4.3 million, of which at least $800,000 was wired offshore.
In conjunction with its civil action, the Commission simultaneously filed, and United States District Court Judge David C. Godbey granted, motions seeking an asset freeze and other emergency relief against several of the defendants, 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.
The defendants in the civil action filed by the Commission are:
In its civil action in United States District Court, the Commission alleges that none of the defendants has ever filed a valid registration statement with the Commission or any state. Regardless, Allixon issued 1.3 million shares in July 2005 to Silver Lake and Crescendo, without any restrictive legend, purportedly pursuant to the exemptions from registration found in Regulation D, Rule 504. In fact, according to the Commission's complaint, Allixon failed to comply with any of the requirements of Rule 504 that would permit the issuance of unrestricted shares. Silver Lake and Crescendo then transferred the shares into the name of Temple Securities, and Knipe and Temple Securities began selling the shares into the United States in August 2005. The sales began on August 29, 2005. From August 31, 2005 through October 5, 2005, Allixon issued several press releases announcing various contracts and business relationships with South Korean entities. Allixon was also the subject of a wave of spam e-mails touting its stock.
The Commission's action alleges that all the defendants violated Sections 5(a) and (c) of the Securities Act, and seeks preliminary and permanent injunctive relief, disgorgement of all illicit profits plus accrued prejudgment interest, and a civil monetary penalty, against all the defendants. Judge Godbey also granted the Commission's ex parte requests for a temporary restraining order against Silver Lake, Crescendo and Temple Securities and an order freezing certain assets. The hearing on the Commission's request for a preliminary injunction is set for December 1, 2005.
Separately, the Commission issued an order, pursuant to Section 12(k) of the Securities Exchange Act of 1934, temporarily suspending trading in the securities of Allixon, beginning at 9:30 a.m. EST on November 17, 2005, and terminating at 11:59 p.m. EST on December 1, 2005. The Commission's order cites concerns that Allixon and/or certain of its shareholders may have conducted an unlawful distribution of Allixon securities. The order also noted that Allixon has made no public filings with the Commission or the NASD and has been the subject of spam e-mail touting the company's shares. For further information, please see the Commission's order suspending trading, at www.sec.gov/litigation/suspensions/34-52787-o.pdf, and its release regarding the suspension, at www.sec.gov/litigation/suspensions/34-52787.pdf.
The Commission gratefully acknowledges the assistance and cooperation of the National Association of Securities Dealers and its Market Regulation Department.