U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 21232 / September 30, 2009
SEC v. Jason M. Genet, Civil Action No. 09-CV-4215 (E.D.N.Y.) (Seybert, J)
SEC Files Fraud Charges Against Jason M. Genet, Former Stock Promoter of China Energy Savings Technology, Inc.
The Securities and Exchange Commission today filed a civil action against Jason M. Genet of Phoenix, Arizona, alleging that Genet participated in an elaborate stock manipulation scheme involving China Energy Savings Technology, Inc., a now-defunct Nevada company with purported operations in China. In its complaint, the Commission alleges that Genet helped China Energy falsely obtain a listing on the Nasdaq National Market System ("NMS") and entered into secret arrangements to give away China Energy stock to people who agreed to purchase China Energy stock in the market, thereby creating the false and misleading impression of bona fide and active investor interest in China Energy. The Complaint alleges that Genet acted in concert with Chiu Wing Chiu, a Chinese national who secretly controlled China Energy. The Commission previously sued Chiu and his associates for their conduct in the China Energy fraud.
Among other things, the Commission's Complaint alleges that Genet played a crucial role in the illegal "pump and dump" manipulation of the common stock of China Energy. According to the Complaint, as part of the manipulation, Genet: (i) helped China Energy falsely obtain a listing on the Nasdaq NMS by helping China Energy to give away shares to hundreds of persons, and thereby created the false and misleading impression that China Energy had a bona fide and active shareholder base; (ii) engaged in unregistered distributions of securities; and (iii) entered into secret arrangements to give away China Energy stock to persons who agreed to purchase China Energy stock in the market, and thereby created the false and misleading impression of active trading and interest in China Energy. In payment for his fraudulent activities, Genet received thousands of shares of China Energy stock, which he later sold into the artificially inflated market, realizing illicit profits in excess of $1.7 million.
The Commission's complaint charges Genet with violating the antifraud and registration provisions of the federal securities laws (Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933). The Commission seeks a permanent injunction against Genet prohibiting him from further violations of the securities laws, disgorgement of his ill-gotten gains, civil penalties and a penny stock bar.
The Commission previously filed fraud charges against China Energy, Chiu Wing Chiu, and several of Chiu's associates, seeking permanent injunctions, disgorgement, penalties, and other relief, as well as an order freezing $3.9 million in assets held in four U.S. brokerage accounts by nominees of Chiu. See Lit. Rel. 19933 (Dec. 4, 2006). On March 27, 2009, the court entered final judgments against Chiu, Lai Fun "Stella" Sim, Jun Tang Zhao, Sun Li, and New Solomon Consultants, finding them liable for fraud, and ordering them to pay disgorgement, prejudgment interest, and civil penalties. The court also imposed officer-and-director bars against Chiu, Sim, Zhao, and Li. On July 31, 2009, the court entered a final judgment against the relief defendant nominees of Chiu, ordering that the $3.9 million still held in U.S. brokerage accounts be turned over as proceeds of the fraud.
For additional related actions by the Commission against China Energy, see Rel. 34-53839 (May 19, 2006) (suspending trading in China Energy stock); Rel. 34-54503A (Sept. 26, 2006) (imposing a second trading suspension in China Energy stock); Admin. Proc. 34-54502 (Sept. 26, 2006) (instituting administrative proceedings against China Energy to determine whether to revoke the company's securities); and Admin. Proc. 34-54881 (Dec. 6, 2006) (administrative law judge's order revoking China Energy's stock registration statements).
The Commission would like to acknowledge the assistance afforded by the Nasdaq Stock Market in this matter.