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JOSE SANCHEZ, Cal. Bar No. 161362
Attorneys for Plaintiff
UNITED STATES DISTRICT COURT
Plaintiff Securities and Exchange Commission ("Commission") alleges as follows: JURISDICTION AND VENUE 1. This Court has jurisdiction over this action pursuant to Section 22(a) of the Securities Act of 1933 ("Securities Act"), 15 U.S.C. § 77v(a), and Sections 21(d)(3)(A), 21(e) and 27 of the Securities Exchange Act of 1934 ("Exchange Act"), 15 U.S.C. §§ 78u(d)(3)(A), 78u(e) & 78aa. 2. Venue is proper in this district pursuant to Section 22 of the Securities Act, 15 U.S.C. § 77v, and Section 27 of the Exchange Act, 15 U.S.C. § 78aa, because certain of the transactions, acts, practices and courses of conduct constituting violations of the laws alleged herein occurred within the Central District of California and because certain of the defendants reside therein. SUMMARY 3. This case involves the ongoing and fraudulent offer and sale of over $3 million in unregistered securities by defendant Alexander Naujoks aka Alexander P. Thorn ("Thorn"), and three companies Thorn created and controls, defendants World Markets Group, Inc. ("World Markets"), Exectrek, Inc. ("Exectrek") and ACSports.com, Inc. ("ACSports") (collectively, the "World Markets Companies"). Defendants are raising funds through the sale of stock in the World Markets Companies to finance and operate their purported online business operations (the "Offering"). From approximately January 1999 to the present, the defendants have offered and sold stock to family, friends, and acquaintances of Thorn and the World Markets Companies' employees, as well as to the general public through cold-calling and the ACSports' website. 4. In the course of soliciting prospective and existing investors, defendants have made numerous material misrepresentations. First, defendants have told investors that one or all of the World Markets Companies would be going public within a specific time period, usually between 30 and 90 days, when in fact defendants have never had the ability or resources to take any of the World Markets Companies public. Second, defendants have told investors that the Offering was about to close and that only a limited number of shares were still available before going public, when in fact defendants have always had hundreds of thousands of shares to sell and did not intend to close the Offering. Third, defendants have told investors that the investment would triple in value immediately once the World Markets Companies went public, even though the World Markets Companies had no real assets or performance history in any of their purported products or services, or financial results. Fourth, defendants havetold investors that Compaq Computer Corporation ("Compaq") and Oracle Corporation ("Oracle"), among other large, well-known, and publicly traded companies, had invested in the World Markets Companies, when in fact no equity or other kind of investment has ever been made by these companies. Fifth, defendants have told investors that the World Markets Companies were valued at $300 million and had a net asset value per share of $14, when in fact defendants had no reasonable basis for these valuations. 5. Defendants are still soliciting investors through fraudulent statements. Since December 2001 and continuing to the present, Thorn and defendants' sales agents have been telling existing and prospective investors that the World Markets Companies still will go public - but this time through a reverse merger - by the end of January or February 2002. The World Markets Companies, however, are still not ready or able to go public. Moreover, Exectrek filed for Chapter 11 bankruptcy protection in December 2001. As a result of their ongoing fraud, defendants have raised approximately $70,000 from unsuspecting investors in the last two months. 6. The defendants, by engaging in the conduct described in this Complaint, have violated and are still violating the securities registration provisions of Sections 5(a) and 5(c) of the Securities Act of 1933 ("Securities Act"), 15 U.S.C. §§ 77e(a) & 77e(c), and the antifraud provisions of Section 17(a) of the Securities Act, 15 U.S.C. § 77q(a), and Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act"), 15 U.S.C. § 78j(b), and Rule 10b-5 thereunder, 17 C.F.R. § 240.10b-5. Unless enjoined, defendants will continue to defraud current and prospective investors. THE DEFENDANTS 7. Thorn, age 36, resides in Chatsworth, California. Thorn created, controls, and is the chief executive officer ("CEO") of the three World Markets Companies. On July 6, 1998, the California Department of Corporationsentered two orders against Thorn and his other related company, World Markets International, Inc., requiring them to desist and refrain from acting as a broker-dealer and offering or selling securities in California in violation of the state's securities laws. 8. Exectrek was incorporated in California on February 10, 1999. Exectrek maintains an office in Los Angeles, California, along with the other World Markets Companies. Exectrek purports to be creating an online reservation system that would cater to business travelers, permitting them to make global reservations for flights, hotels, and restaurants on the Internet. Exectrek's corporate status has been suspended by the State of California. On December 21, 2001, Exectrek filed for Chapter 11 bankruptcy protection. 9. ACSports was founded by Thorn during 1998 and was incorporated in Delaware on July 5, 2000. ACSports purports to be creating an online competitive sports league, in which players would be able to pay a fee to play games against other players over the Internet for cash prizes. ACSports has a website which has posted on the Internet a private placement memorandum for a purported offering of $30 million for ACSports. 10. World Markets was incorporated in Delaware on July 5, 2000. World Markets purports to be the holding company for Exectrek and ACSports. Thorn also represents to investors that World Markets is an investment banking firm that has been in business since 1985, and has had previous experience taking companies public. THE FRAUDULENT SCHEME A. Defendants' Offer and Sale of Securities 11. Since 1999 and continuing to the present, defendants have engaged in the Offering of unregistered stock in the World Markets Companies at $5 per share with the intent to raise $5 million. Thus far, defendants have raised over $3 million from the sale of stock in the World Markets Companies tohundreds of investors around the United States. Defendants are currently soliciting existing and prospective investors to raise more money for the World Markets Companies. 12. Thorn, with the help of sales agents under his direction and control, began to offer and sell shares in the World Markets Companies in early 1999. Defendants' sales personnel used a sales script created by Thorn in soliciting prospective investors. 13. Thorn led the sales effort, purchasing lead lists on a monthly basis from a third party. The lead lists provide, among other information, the names, addresses, and telephone numbers of prospective investors. Thorn and defendants' sales agents used these lead lists to solicit individuals via the telephone. Defendants also solicited family and friends of Thorn and of defendants' employees. The ACSports website also offered users investment opportunities in ACSports. 14. Prospective investors who expressed interest in the World Markets Companies' investment were sent various materials by mail, which sometimes included private placement memoranda and business plans for Exectrek and ACSports, and a subscription agreement for their purchase of Exectrek stock. 15. Defendants initially offered investors the opportunity to purchase shares only in Exectrek for $5 per share. At some point, investors were told that for each $5 invested, they would receive an equal number of shares in each of the three World Markets Companies without any additional investment. Sales personnel sometimes offered investors stock in ACSports or World Markets rather than Exectrek. The promise that an investor would receive shares in all three World Markets Companies for an investment in any one, however, remained the same. As evidence of the investment, investors were promised stock certificates. At some point after making their investments, investors started receiving quarterly account statements showing that they had shares in each of theWorld Markets Companies. 16. Thorn and defendants' sales agents were paid commissions and were offered other sales incentives. Many investors were not told that the sales personnel would be paid such commissions. B. Defendants Made Materially False and Misleading Representations 17. The defendants have each made or caused to be made numerous materially false and misleading representations to prospective and existing investors. Each of the defendants knew or was reckless in not knowing that the following representations were false and misleading when made: 1. Defendants Falsely Claim that an IPO is Imminent 18. Beginning in early 1999, Thorn and defendants' sales agents solicited investors by claiming that one or all of the World Markets Companies would go public through an initial public offering within a specific time period - usually within 30 to 90 days, or by a specific date. When these promises went unfulfilled, defendants made new representations, always promising that an IPO was just around the corner. 19. Defendants' representations regarding the impending IPO were false and misleading when made. None of the World Markets Companies has ever been in a position to go public within 30 to 90 days. To this day, none of the World Markets Companies has gone public. None of the World Markets Companies has ever filed an S-1 registration statement with the Commission, which is a prerequisite to an IPO. In addition, none of the World Markets Companies has ever had audited financial statements or adequate books and records. 2. Defendants Falsely Claim that the World Markets Companies' Investment Would Triple in Value 20. Thorn and defendants' sales agents falsely told investors that the World Markets Companies' investment had "very little" or "no" risk, claimingthat the stock prices would at least triple once the World Markets Companies went public. Investors were generally told that after the IPO, the stock price for any one of the World Markets Companies would start no lower than $5 per share, thus immediately tripling the investor's money since they received shares in all three World Markets Companies for $5 per share. 21. These representations were made without any factual basis. At the time these representations were made, the World Markets Companies had no performance history for any of their purported products, services or financial results. During the period of December 1999 through September 2001, Exectrek earned no revenue, and has made only approximately $42,000 throughout its entire history. Similarly, ACSports has only received about $4,000 in revenue to date. In addition, the World Markets Companies have always had minimal, if any, real assets. As a result, Exectrek has defaulted on numerous financial obligations, including payments to vendors, employees, and tax authorities, and, on December 21, 2001, Exectrek filed for Chapter 11 bankruptcy protection. 22. The World Markets Companies' purported products and services also have never been operational. At one point, Exectrek maintained a website, but an Internet user could not use the website to make travel reservations online. The Exectrek website is no longer on line. Similarly, ACSports distributed CD-ROMS to registrants to facilitate their participation in ACSports' online gaming league, but these CD-ROMS could be played only on one's own personal computer, not against other players over the Internet, as promised to investors. 3. Defendants Falsely Claim that a Limited Number of Shares Are Available for a Limited Time 23. To pressure investors to buy shares immediately, Thorn and defendants' sales agents repeatedly told investors that only a limited number of shares were available and that the Offering was going to close on a set date, whennone of this was true. For example, Thorn sent investors a letter on December 1, 2000, stating that the World Markets Companies were closing the Offering on December 29, 2000, that they would not be able to accept any investors after this date, and that investors had "one last chance" to buy stock in the "first round" of financing. On December 26, 2000, Thorn sent an investor a letter claiming that they "had closed funding for the first round of [$]5 million" but nevertheless would offer this investor a "last call" to invest. Similarly, in a May 9, 2001 letter to shareholders, Thorn offered investors a chance to increase their investment, but claimed that only 50,000 shares were left unsold. At least one investor was told that only 90,000 shares were available as of December 2001. 24. These representations were all false when made. Thorn and defendants' sales agents repeatedly told investors to pressure investors to buy shares and induce an immediate investment. Thorn coached defendants' sales force to tell investors: "[T]here's only so much time left." Thorn further told the sales agents "to pump . . . [prospective investors] up, and . . . get them going." As of January 2002, there were at least approximately 400,000 shares still available to sell in defendants' Offering. 4. Defendants Falsely Claim that Oracle and Compaq Invested in the World Markets Companies 25. To lend credibility to the repeated claims that a public offering in one or all of the World Markets Companies was imminent and to persuade investors that they were investing in viable and safe companies, Thorn and defendants' sales agents falsely told investors that the World Markets Companies had "strategic relationships" and "partnerships" with various large, well-known publicly traded companies such as Oracle and Compaq. 26. Thorn and defendants' sales agents specifically told investors that Oracle had made an equity investment in World Markets Companies. Defendants gave investors, and posted on ACSports' and Exectrek's websites, apress release dated April 28, 2000, in which he claimed that Oracle had "agreed to set up a long-term agreement with Exectrek that includes an [e]quity investment worth $1,000,000." Thorn and other sales agents also verbally told investors that Oracle had made an equity investment by donating software to the World Markets Companies in exchange for stock. These claims were false when made. Oracle never made, or agreed to make, any equity investment in any of the World Markets Companies. Nor has Oracle donated, or agreed to donate, any software to the World Markets Companies. 27. Defendants also told investors that Exectrek had a "strategic relationship" with Compaq that included an equity investment by Compaq. Contrary to these representations, however, Compaq never made any kind of investment in the World Markets Companies. 5. Defendants Provide Investors with False and Misleading Financial Information about the World Markets Companies 28. Defendants also misled investors by disseminating letters and other documents containing false financial information about the World Markets Companies and their stock. Defendants gave investors a letter dated March 15, 2001, that was purportedly prepared by an "independent" investment banking finance consultant to World Markets. This letter also claimed to contain an "independent" due diligence analysis of the World Markets Companies. This letter was false and misleading, because the letter was prepared by an Exectrek employee. 29. Similarly, on May 9, 2001, Thorn sent investors another false and misleading letter (the "May 9, 2001 letter"). This letter announced that the World Markets Companies "had closed" on another $3 million in financing from an investment banking firm, bringing the total invested to $6.2 million. In fact, none of the World Markets Companies ever received $3 million in financing from any investment banking firm. 30. In the same May 9, 2001 letter, Thorn claimed that the World Markets Companies had a current valuation of over $300 million and a net asset value per share of $14.29, which, according to Thorn, meant that the shares would be highly undervalued on listing. These valuations, however, had no reasonable basis, since the World Markets Companies had and still have no significant assets or income. C. Defendants Have Mismanaged and Commingled Investor Funds 31. Throughout defendants' Offering, Thorn has mismanaged investor funds and commingled the funds of World Markets Companies with his and employees' personal money. At various times, investor funds were deposited in the company bookkeeper's personal bank account. Investor funds were also used to pay Thorn's personal expenses. Thorn's rent payment of approximately $1500 per month and car payment of almost $500 per month were regularly paid from Exectrek funds. From time to time, Thorn also wrote checks to himself from Exectrek bank accounts. In 2000, these payments were in addition to a $125,000 salary. D. Defendants' Fraudulent Solicitations are Ongoing 32. Thorn and defendants' sales agents are still soliciting investors. In December 2001 and January 2002, Thorn and at least one sales agent have contacted existing investors, attempting to induce them to make additional investments in the World Markets Companies. In addition to these personal solicitations, defendants have also engaged in an offering on ACSports' website. Thorn also plans to start another offering for the World Markets Companies to raise $6 million. 33. In making their recent solicitations, defendants continue to mislead investors. Rather than disclose the true state of defendants' finances and IPO plans, Thorn and defendants' sales agents have told investors that the plans to take the World Markets Companies public are on track. They further have toldinvestors that World Markets will go public by the end of January or February 2002 via a reverse merger. 34. As a result of defendants' continuing fraud, defendants' recent solicitations continue to be successful. Defendants have raised from investors approximately $45,000 in December 2001, and approximately $25,000 in January 2002, from unsuspecting investors. FIRST CLAIM FOR RELIEF OFFER AND SALE OF UNREGISTERED SECURITIES Violations of Sections 5(a) and 5(c) of the Securities Act, 15 U.S.C. §§ 77e(a) & 77e(c) (Against All Defendants) 35. Paragraphs 1 through 34 are realleged and incorporated herein by reference. 36. The defendants, and each of them, by engaging in the conduct described above, directly or indirectly: (a) made use of means or instruments of transportation or communication in interstate commerce, or of the mails, to offer to sell or to sell securities; or (b) carried or caused to be carried such securities through the mails or in interstate commerce for the purpose of sale or for delivery after sale; in violation of Sections 5(a) and 5(c) of the Securities Act, 15 U.S.C. §§ 77e(a) & 77e(c). 37. No registration statement has been filed with the Commission or has been in effect with respect to the offer and sale of securities in the World Markets Companies. 38. By reason of the foregoing, each of the defendants violated, and unless restrained and enjoined, will continue to violate, Sections 5(a) and 5(c)of the Securities Act, 15 U.S.C. §§ 77e(a) & 77e(c). SECOND CLAIM FOR RELIEF FRAUD IN THE OFFER OR SALE OF SECURITIES Violations of Section 17(a) of the Securities Act, 15 U.S.C. § 77q(a) (Against All Defendants) 39. Paragraphs 1 through 34 are realleged and incorporated herein by reference. 40. The defendants, and each of them, by engaging in the conduct described above, directly or indirectly, in the offer or sale of securities, by the use of means or instruments of transportation or communication in interstate commerce or by use of the mails: (a) with scienter, employed devices, schemes or artifices to defraud; (b) obtained money or property by means of untrue statements of material fact or by omitting to state material facts necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading; or (c) engaged in transactions, practices or courses of business which operated or would operate as a fraud or deceit upon the purchasers of such securities; in violation of Section 17(a) of the Securities Act, 15 U.S.C. § 77q(a). 41. By reason of the foregoing, each of the defendants violated, and unless restrained and enjoined will continue to violate, Section 17(a) of the Securities Act, 15 U.S.C. § 77q(a). THIRD CLAIM FOR RELIEF FRAUD IN CONNECTION WITH THE PURCHASE OR SALE OF SECURITIES Violations of Section 10(b) of the Exchange Act, 15 U.S.C. § 78j(b), and Rule 10b-5 thereunder, 17 C.F.R. § 240.10b-5 (Against All Defendants) 42. Paragraphs 1 through 34 are realleged and incorporated herein by reference. 43. The defendants, and each of them, with scienter, by engaging in the conduct described above, directly or indirectly, in connection with the purchase or sale of securities, by the use of means or instrumentalities of interstate commerce, or of the mails: (a) employed devices, schemes or artifices to defraud; (b) made untrue statements of material fact or omitted to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading; or (c) engaged in acts, practices or courses of business which operated or would operate as a fraud or deceit upon other persons; in violation of Section 10(b) of the Exchange Act, 15 U.S.C. § 78j(b), and Rule 10b-5 thereunder, 17 C.F.R. § 240.10b-5. 44. By reason of the foregoing, each of the defendants violated, and unless restrained and enjoined will continue to violate, Section 10(b) of the Exchange Act, 15 U.S.C. § 78j(b), and Rule 10b-5 thereunder, 17 C.F.R. 240.10b-5. PRAYER FOR RELIEF WHEREFORE, the Commission respectfully requests that the Court: I. Issue findings of fact and conclusions of law that defendants Thorn, Exectrek, ACSports, and World Markets each committed the alleged violations; II. Issue, in a form consistent with Fed. R. Civ. P. 65, orders temporarily, preliminarily and permanently enjoining Thorn, Exectrek, ACSports, and World Markets, and their officers, agents, servants, employees and attorneys, and those persons in active concert or participation with any of them, who receive actual notice of the order by personal service or otherwise, and each of them, from violating, directly or indirectly, Sections 5(a), 5(c) and 17(a) of the Securities Act, and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder; III. Issue, in a form consistent with Fed. R. Civ. P. 65, a temporary restraining order and a preliminary injunction freezing the assets of each of the defendants; prohibiting each of the defendants from destroying documents; allowing expedited discovery; and ordering accountings from each of the defendants; IV. Enter an order that defendants Thorn, Exectrek, ACSports, and World Markets each disgorge all profits gained directly or indirectly from the illegal conduct, together with prejudgment interest thereon; V. Enter an order directing each defendant to pay civil penalties under the Securities Enforcement Remedies and Penny Stock Reform Act of 1990; VI. Retain 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; and VII. Grant such other and further relief as this Court may determine to be just and necessary.
http://www.sec.gov/litigation/complaints/complr17357.htm
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