United States Securities and Exchange Commission Litigation Release No. 16082 / March 9, 1999 SECURITIES AND EXCHANGE COMMISSION v. PARAMOUNT CAPITAL MANAGEMENT, INC. AND WILLIAM C. BOLTON, 97 Civ. 8577 (S.D.N.Y.) (SHS) The Securities and Exchange Commission yesterday filed an amended complaint in federal court in Manhattan, substituting William C. Bolton ("Bolton") for the unnamed defendant sued as "John Doe a/k/a Kenneth Bridget" in the original complaint in this matter, which was filed on November 18, 1997. Named in the amended complaint are: William C. Bolton, a 31 year old resident of Marlboro, New Jersey. On January 20, 1999, a grand jury sitting in the Southern District of New York returned a twenty-five count indictment charging Bolton with conspiracy to commit securities fraud, mail fraud and wire fraud, and with mail fraud, bank fraud and moneylaundering; and Paramount Capital Management, Inc. ("Paramount"), a New York corporation controlled by Bolton, which had offices at 11 Broadway, New York, New York. Paramount held itself out to the public as an "investment banking and full service broker" that serviced both institutional clients and individual investors, and represented to customers that it was a member of various industry associations and one stock exchange. In the amended complaint, the Commission alleges that: Paramount and Bolton, directly or indirectly, fraudulently obtained over $67,000 from at least 14 investors by inducing them to invest in a fictitious initial public offering ("IPO") of a nonexistent company -- "Micronet Corp." ("Micronet"). Paramount and Bolton, and others at Bolton’s direction, falsely represented tothe investors that the IPO was being underwritten by Paramount, and that Paramount was a "full service broker" and a member of the National Association of Securities Dealers, Inc. ("NASD"), the Securities Investor Protection Corporation ("SIPC"), the Municipal Securities Rulemaking Board ("MSRB"),and the Philadelphia Stock Exchange ("PHX"). Using the alias "Kenneth Bridget," Paramount, Bolton, and others at Bolton’s direction, "cold-called" the various investors and solicited them to invest in the purported Micronet IPO. Paramount and Bolton, and others at Bolton’s direction, made numerous false and misleading representations to the investors about Micronet including the business in which Micronet was allegedly engaged; the offering price of the Micronet IPO; the price to which Micronet shares were expected to rise; and the fact that the IPO was oversubscribed. The representations made by Paramount and Bolton, and others at Bolton’s direction, were materially false and misleading in that Paramount had no Micronet IPO shares to sell; the investor’s money was not going to be invested in any IPO or Micronet stock, but rather would be diverted; and Paramount was never a member of the NASD, SIPC, MSRB, or PHX, and was never registered as a broker-dealer with the Commission. In its amended complaint, the Commission alleges that Paramount and Bolton violated the antifraud and broker- dealer registration provisions of the federal securities laws, Section 17(a) of the Securities Act of 1933, Sections 10(b) and 15(a) of the Securities Exchange Act of 1934, and Rule 10b-5 thereunder. Among other relief, the Commission seeks a final judgment permanently enjoining Paramount and Bolton from future violations of these antifraud provisions, an accounting and disgorgement of Paramount’s and Bolton’s ill gotten gains plus prejudgment interest, and civil penalties. The litigation is pending. For more information see Litigation Release No. 15566.