U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 21019 / April 30, 2009
Securities and Exchange Commission v. Golden State Equity Investors, Inc., Case No. 4:09-CV-01037 (S.D. Tex. filed April 30, 2009)
SEC Files Settled Action Against Golden State Equity Investors, Inc. for Securities Registration Violations
The Securities and Exchange Commission ("SEC") today filed a settled civil action in the United States District Court for the Southern District of Texas against Golden State Equity Investors, Inc., formerly known as Golden Gate Investors, Inc. ("GGI"), for its alleged violations of the registration provisions of the federal securities laws. The Commission's complaint alleges that, during the period from June 2005 through September 2006, Grifco International, Inc. ("Grifco"), a publicly-traded company that claims to be an international provider of oil and gas services equipment, issued 15,750,000 purportedly unrestricted, nonexempt securities to GGI. The agreements underlying the unregistered stock transactions provided that Grifco would issue GGI large blocks of Grifco stock in return for an up-front monetary advance and a large percentage of the net sales proceeds after the stock was sold. Shortly after receiving its shares, GGI sold its Grifco stock to the investing public and then returned a portion of the proceeds to Grifco. The complaint alleges that none of the securities transactions were registered with the Commission and the transactions did not satisfy any exemption from registration. The SEC alleges that, as a result of this conduct, GGI received nearly $3.8 million from the sale of newly-issued Grifco stock and remitted approximately $2.3 million of those proceeds to Grifco during 2005 and 2006. As a result, GGI's ill-gotten gains on these unregistered securities transactions were $1,269,907.
GGI, without admitting or denying the allegations in the complaint, consented to the entry of a final judgment enjoining it from violating Sections 5(a) and 5(c) of the Securities Act of 1933. The final judgment also orders it to pay disgorgement of $1,269,907, plus $257,672 in prejudgment interest, and to pay a civil penalty in the amount of $50,000.
The Commission acknowledges the assistance of the United States Attorney's Office for the Southern District of Texas, the Federal Bureau of Investigation, and The Harris County (Houston, Texas) District Attorney's Office.
GGI is not affiliated with Golden Gate Capital, a private equity firm based in San Francisco, California.
The investigation is ongoing.