U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 21400 / February 2, 2010
Securities and Exchange Commission v. Winning Kids, Inc., Christian Hainsworth, Robert Comiskey, Edward Tamimi, and Victor Selenow, Defendants, Case No. 10-CV-80186 (S.D. Fla.)(January 29, 2010)
SEC Brings Fraud Charges Against Children's Book Company
The United States Securities and Exchange Commission today announced that it filed a civil injunctive action against Winning Kids, Inc., its founder and CEO, Christian Hainsworth, and three former sales agents for conducting a fraudulent offering scheme reaching approximately 200 investors nationwide. According to the complaint, the defendants raised approximately $2 million from investors, purportedly for the development and marketing of children's books.
The SEC alleges that Winning Kids and Hainsworth defrauded investors by offering and selling unregistered securities through a series of private offerings, which they marketed primarily through radio advertisements. The SEC also charged sales agents Robert Comiskey, Edward Tamimi, and Victor Selenow for their role in the scheme.
According to the SEC's complaint, the defendants misrepresented to investors that the company was already established, expanding nationally, and starting an acceleration phase of extraordinary growth. In reality, Winning Kids generated almost no revenue from the sale of its books or any other products from 2004 through 2008. The complaint also alleges the defendants provided investors with baseless profit projections of 300 percent annual returns at a time when the company was not even actively attempting to commercially sell and distribute the books. The complaint further alleges the defendants failed to disclose that the sales agents were receiving commissions of up to 20 percent for the sale of Winning Kids' shares. Winning Kids and Hainsworth also failed to disclose that Hainsworth was using offering proceeds for personal expenses, according to the complaint.
The SEC also charged Comiskey, Tamimi, and Selenow with broker-dealer registration violations, and Hainsworth with aiding and abetting these violations.
The SEC's complaint, filed in the United States District Court for the Southern District of Florida, alleges that Winning Kids, Hainsworth, Comiskey, Tamimi, and Selenow violated Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder. The complaint also alleges that Comiskey, Tamimi, and Selenow violated Section 15(a) of the Exchange Act, and that Hainsworth aided and abetted their violations.
The SEC is seeking permanent injunctive relief against the defendants, disgorgement with prejudgment interest, and civil money penalties.
Without admitting or denying the allegations in the complaint, Winning Kids and Hainsworth have consented to the entry of a final judgment that: (i) permanently enjoins them from committing or aiding and abetting future violations of the above provisions; and (ii) orders them to pay disgorgement of ill-gotten gains, prejudgment interest thereon, and civil penalties, in amounts to be determined by the court upon the Commission's motion.
See Also: SEC Complaint