U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 21663 / September 24, 2010
SEC v. Mark Johnson, et al., Civil Action No. 10-cv-5014 (E.D. Pa.)
SEC Charges Four Individuals For Scheme To Manipulate The Market For Two Microcap Stocks.
The Securities and Exchange Commission announced today that it charged four individuals and one entity involved in a scheme to manipulate the market in two separate microcap stocks - Exit Only, Inc. and CX2 Technologies, Inc.
The Commission's complaint, filed in federal district court in Philadelphia, alleges that, from at least January 2008 through March 2008, Mark Johnson of Baltimore, Maryland, Mark Manoff of Wayne, Pennsylvania, Leonard Gotshalk of Ashland, Oregon, and Kyle Gotshalk of Canyon Country, California, the President and Chief Executive Officer of Exit Only, Inc., engaged in a scheme to manipulate the market for the purpose of artificially inflating each company's stock price and to create the false appearance of an active and liquid market. The defendants entered into agreements with individuals they believed would generate purchases of each company's stock in exchange for the payment of cash kickbacks. Unbeknownst to the defendants, they had actually entered into agreements with a witness secretly cooperating with the government and an undercover Special Agent of the Federal Bureau of Investigation (FBI). The complaint alleges that, to effectuate this scheme, defendants provided information regarding press releases before being issued to the public, nonpublic shareholders lists, and paid cash kickbacks to generate purchases of 539,000 shares of stock in Exit Only, Inc. and CX2 Technologies, Inc.
The complaint charges violations 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. The complaint seeks permanent injunctions against all defendants, and disgorgement of ill-gotten gains, together with prejudgment interest, civil penalties, and penny stock bars against the individual defendants.
Today's action is the most recent in a series of Commission cases arising out of an investigation into manipulation of the securities markets conducted in parallel with the U.S. Attorney's Office for the Eastern District of Pennsylvania and the FBI.
For further information, please see:
Litigation Release No. 20828 (December 14, 2008).
Litigation Release No. 20899 (February 12, 2009).
Litigation Release No. 21426 (February 25, 210).