U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 19798 / August 10, 2006
SEC v. David Sarna, et ano., Civil Action No. 06-CV-6084 (RJH) (S.D.N.Y.)
SEC Charges David Sarna and Issac Nussen With Broker Kickback Fraud
The Securities and Exchange Commission announced today that it filed a complaint in the United States District Court for the Southern District of New York against David Sarna and Issac Nussen alleging that they manipulated the market for Aurora Medical Technology, Inc. stock by participating in an undisclosed broker kickback scheme.
The Commission's complaint alleges that, since May 2006, Sarna and Nussen participated in an undisclosed kickback arrangement with a former stock promoter and an individual whom Sarna and Nussen believed to be associated with a registered broker-dealer. Sarna and Nussen said that they controlled a majority of Aurora's stock and that they were funding the company's operations with sale proceeds of Aurora stock. To generate additional stock sales and create trading volume in Aurora stock, Sarna and Nussen agreed to pay these individuals an amount equal to 30 percent of Sarna and Nussen's stock sale proceeds as a kickback for soliciting retail customers. On June 8, 2006, Sarna and Nussen deposited 3,286,403 shares of Aurora stock into an account at the brokerage firm. On June 21 and 22, 2006, the person Sarna and Nussen believed to be associated with the brokerage firm sold 83,000 and 56,000 Aurora shares, respectively, from Sarna and Nussen's nominee account to other accounts at the brokerage firm. On July 3, 2006, Sarna and Nussen received the sale proceeds of $25,000, and on July 6, 2006, Sarna and Nussen paid a $7,500 kickback to the former stock promoter.
Beginning on July 14, 2006, the Commission temporarily suspended trading in the securities of Aurora for ten business days pursuant to Section 12(k) of the Exchange Act because of possible manipulative conduct occurring in the market for the company's stock. [34-54144]
The complaint charges Defendants with violating of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. In its action, the Commission is seeking permanent injunctions prohibiting Defendants from committing future violations of the foregoing federal securities laws, disgorgement of ill-gotten gains plus pre-judgment interest thereon, and civil penalties.