UNITED STATES DISTRICT COURT
Plaintiff, Securities and Exchange Commission (the "Commission"), for its Complaint alleges as follows:
NATURE OF THE ACTION
1. The SEC brings this enforcement action against Sean Nevett ("Nevett" or "Defendant") for engaging in an unlawful distribution and sale of the stock of Pay Pop, Inc. ("Pay Pop"). Specifically, Defendant participated in the public distribution and sale of the shares of common stock of Pay Pop, notwithstanding the fact that there was no registration statement filed with the Commission or any applicable exemption from registration, in violation of Section 5 of the Securities Act of 1933 (the "Securities Act") [15 U.S.C. §77e]. Between 1998 and 1999, Defendant sold approximately 3.1 million shares of Pay Pop common stock into the market. As a result, Nevett made unlawful profits of $257,061.01.
2. The SEC brings this action for an order permanently enjoining Defendant from future violations of Section 5 of the Securities Act, pursuant to Section 20(b) of the Securities Act [15 U.S.C. §77t(b)], requiring Defendant to disgorge any profits resulting from this conduct, including prejudgment interest on such amount, and imposing civil money penalties under Section 20(d) of the Securities Act [15 U.S.C. §77t(d)]. In addition, this action also seeks the imposition of a penny stock bar pursuant to Section 20(g) of the Securities Act [15 U.S.C. §77t(g)].
3. This Court has jurisdiction over this action pursuant to Sections 20(b) and 22(a) of the Securities Act [15 U.S.C. §§77t(b) and 77v(a)].
4. Defendant has, directly or indirectly, made use of the means or instrumentalities of interstate commerce and/or of the mails in connection with the transactions described in this Complaint.
DEFENDANT AND OTHER RELEVANT ENTITIES
5. Defendant is 35 years old and currently lives in California. Nevett is a former registered representative who passed his Series 7 and 63 examinations.
6. During the relevant time period, Nevett owned and controlled two companies that he used to conduct his promotional and investment activities: Neptune Capital Inc. ("Neptune") and Big Rock Marketing Inc. ("Big Rock"). Nevett opened at least 11 brokerage accounts in the names of Neptune and Big Rock. These brokerage accounts were located in at least 9 different brokerage firms located in the United States and Canada. Nevett at all times controlled the accounts of Big Rock and Neptune and maintained trading authority over those accounts.
7. Pay Pop was a telecommunications company incorporated under the laws of Nevada, with its principal place of business located in British Columbia, Canada. Pay Pop's stock was traded in the United States on the NASD Over the Counter Bulletin Board.
8. CIBC Mellon Trust Company ("CIBC Mellon") is a corporation formed under Canadian law, doing business throughout Canada. At all relevant times, CIBC Mellon served as Pay Pop's transfer agent.
A. The Illegal Distribution of Pay Pop Stock
9. Between July 1998 and March 2000, Pay Pop engaged in an unregistered public distribution of Pay Pop common stock to investors in the United States and Canada. In this connection, Pay Pop issued approximately 97 million shares of stock. Two of Pay Pop's officers and directors, Daryl Desjardins and Robert Zaba, authorized the issuance of the Pay Pop shares to the public.
10. During the public distribution of Pay Pop stock, neither Pay Pop, nor anyone involved in the distribution, filed a registration statement with the Commission.
11. From late 1998 through mid-1999, Nevett participated in the unregistered distribution of the Pay Pop stock to the public. At the direction of Desjardins and Zaba, CIBC Mellon sent Nevett, in at least three installments, a total of 26 share certificates, representing 6.85 million shares of Pay Pop stock. Four of the 26 share certificates, representing 1.2 million Pay Pop shares, were issued in the name of Big Rock and Neptune and later sold by Nevett. The remaining 22 share certificates, representing 5.65 million Pay Pop shares, were for individual investors located in the United States. Nevett delivered these 22 Pay Pop share certificates to the other investors. A large percentage of the stock represented by the 26 certificates CIBC Mellon sent to Nevett were deposited into brokerage accounts in the United States and sold into the market shortly after Nevett's receipt of the stock.
B. Nevett's Unregistered Sales of Pay Pop Stock
12. In addition to the 1.2 million Pay Pop shares Nevett received from CIBC Mellon, Nevett also received an additional 1.9 million Pay Pop shares directly from (i) Desjardins or nominees of Desjardins; and (ii) others who were engaged in the sale and distribution of Pay Pop stock. Nevett received his 3.1 million shares of Pay Pop stock in exchange for his participation in the unregistered distribution of Pay Pop stock and for his payment of a portion of corporate debt owed by Pay Pop. All of the stock was received in the name of Neptune and Big Rock.
13. Nevett sold all of the 3.1 million shares of Pay Pop stock he received within a short period of time after its receipt. As a result of Nevett's sales, Nevett received profits of $257,061.01.
14. Because Nevett obtained all of his Pay Pop stock with the view to distributing those shares to the public, Nevett was an underwriter of Pay Pop stock.
15. None of the Pay Pop stock Nevett sold or distributed was registered with the Commission as required by Section 5 of the Securities Act. As a consequence of Nevett's underwriter status and the nature and timing of his acquisition and sale of Pay Pop stock, none of Nevett's transactions in Pay Pop stock were exempt from registration.
CLAIM FOR RELIEF
Violation of Section 5 of the Securities Act of 1933 [15 U.S.C. §77e ]
16. Paragraphs 1 through 15 are hereby realleged and incorporated by reference.
17. The shares of Pay Pop stock were securities within the meaning of Section 2(1) of the Securities Act [15 U.S.C. §77b(1)].
18. Section 5 of the Securities Act prohibits the sale of any security unless a registration statement is in effect with regard to that security, absent an applicable exemption from that requirement. [15 U.S.C. §77e].
19. No registration statement had been filed with the Commission or was in effect with regard to any public sale of the Pay Pop securities at issue.
20. As described above, defendant Nevett directly or indirectly (a) without a registration statement in effect as to the securities, (i) made use of the means or instruments of transportation or communication or the mails to sell such securities through the use or medium of a prospectus or otherwise, or (ii) carried or caused to be carried through the mails, or in interstate commerce, by any means or instruments of transportation, such securities for the purpose of sale or for delivery after sale, and (b) made use of the means or instruments of transportation or communication in interstate commerce or of the mails to offer to sell or offer to sell through the use or medium of a prospectus or otherwise securities for which a registration statement had not been filed as to such securities, in violation of Section 5 of the Securities Act [15 U.S.C. §77e] and regulations thereunder.
PRAYER FOR RELIEF
WHEREFORE, the Commission respectfully requests that this Court enter a final judgment:
Permanently enjoining defendant Nevett from violating, directly or indirectly, Section 5 of the Securities Act [15 U.S.C. §77e];
Ordering defendant Nevett to disgorge the ill-gotten gains that he received as a result of his wrongful conduct, to pay prejudgment interest thereon, and to pay civil money penalties pursuant to Section 20(d) of the Securities Act [15 U.S.C. §77t(d)];
Barring defendant Nevett for a two-year period from participating in any offering of any penny stock as defined by Section 3 (a)(51)(A), [15 U.S.C. §78c(a)(51)(A)] and Section 20(g) of the Securities Act [15 U.S.C. §77t(g)];
Granting such other relief as this Court may deem just and proper; and
Retaining jurisdiction of this action in accordance with the principles of equity and the Federal Rules of Civil Procedure in order to implement and carry out the terms of
all orders and decrees that may be entered or to entertain any suitable application or motion for additional relief within the jurisdiction of this Court.