U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 21490 / April 16, 2010
Securities and Exchange Commission v. Exotics.com, Inc., et al., Civil Action No. 2:05-cv-00531-PMP-GWF, United States District Court, District of Nevada
SEC Obtains Final Judgments Against Canadian Defendants In Penny Stock Fraud
The Securities and Exchange Commission announced that a federal court in Nevada has entered final judgments, by consent, against Ingo W. Mueller of Vancouver, British Columbia, and Firoz Jinnah of Burnaby, British Columbia, in connection with a fraudulent scheme involving penny stock issuer Exotics.com, Inc. Exotics.com, a Nevada corporation based in Vancouver, British Columbia, was in the business of operating adult-oriented Web sites, and its common stock traded on the Over-the-Counter Bulletin Board beginning in 2001. Among other things, the final judgments, entered by the court on April 15, 2010, order Mueller to pay a civil penalty of $75,000, order Jinnah to pay a civil penalty of $50,000, and impose five-year officer and director bars and five-year penny stock bars against both Mueller and Jinnah.
The Commission commenced this action by filing its complaint on April 25, 2005, against 13 defendants and one relief defendant. The Commission's complaint alleged that, between at least 1999 and 2002, the defendants engaged in a stock manipulation and accounting fraud perpetrated by, among others, its officers, attorneys and outside auditors. According to the complaint, Jinnah was nominally the sole officer and director of Exotics.com, but Mueller was de facto the company's top officer and was Jinnah's employer outside of Exotics.com. The complaint alleged, among other things, that Mueller, Jinnah, and other participants in the scheme engaged in manipulative trading of Exotics.com stock for the purpose of artificially increasing the stock's price and trading volume and were responsible for various false and misleading public filings that Exotics.com made with the Commission and for the dissemination of false and misleading public statements about Exotics.com in a press release and spam e-mail and fax messages.
Mueller and Jinnah agreed to settle this matter without admitting or denying the allegations in the Commission's complaint. Mueller consented to the entry of a permanent injunction prohibiting him from violating Sections 10(b), 13(d), and 16(a) of the Securities Exchange Act of 1934 (Exchange Act) and Rules 10b-5, 13d-1, and 16a-3 thereunder. Mueller also was ordered to pay a civil penalty of $75,000 and is barred for five years from serving as an officer or director of a public company and barred for five years from participating in any offering of a penny stock. Jinnah consented to the entry of a permanent injunction prohibiting him from violating Sections 10(b), 13(b)(5), 13(d), and 16(a) of the Exchange Act and Rules 10b-5, 13d-1, and 16a-3 thereunder and aiding and abetting violations of Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B) and Rules 12b-11, 12b-20, 13a-1, 13a-11, and 13a-13 thereunder. Jinnah also was ordered to pay a civil penalty of $50,000 and is barred for five years from serving as an officer or director of a public company and barred for five years from participating in any offering of a penny stock.
The Commission previously obtained judgments by default against two other defendants and judgments by consent against four additional defendants. The civil action remains pending against the remaining five defendants and a relief defendant.
The Commission acknowledges the assistance of the British Columbia Securities Commission.
For further information, see Litigation Release Nos. 19207 (April 28, 2005) [civil injunctive action filed], 19645 (April 7, 2006) [judgment by default against Exotics.com], 19699 (May 15, 2006) [judgment by consent against Barry Duggan], 19957 (January 4, 2007) [judgment by default against Gary Thomas], 21028 (May 7, 2009) [judgment by consent against Edward James Wexler], 21456 (March 19, 2010) [judgments by consent against Stephen P. Corso and Brian K. Rabinovitz], and Exchange Act Release Nos. 59766 (April 14, 2009) [forthwith suspension of Stephen P. Corso, CPA] and 61771 (March 24, 2010) [suspension of Brian K. Rabinovitz, CPA].