U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 21992 / June 7, 2011
Securities and Exchange Commission v. David Ronald Allen, et al., Civil Action No. 3:11-CV-822-O (N.D. Tex.)
SEC OBTAINS PRELIMINARY INJUNCTION FREEZING ASSETS IN CASE INVOLVING PONZI SCHEME BY CO-FOUNDER OF CHINA VOICE HOLDING CORP.
On June 5, 2011, the Securities and Exchange Commission obtained a preliminary injunction against multiple defendants in a case involving the co-founder of China Voice Holding Corp. The Commission also received additional relief it sought, including an order freezing the assets of multiple defendants and relief defendants.
The Commission filed an emergency action on April 28, 2011, alleging that China Voice’s co-founder and former Chief Financial Officer, David Ronald Allen, with the assistance of two associates, Alex Dowlatshahi and Christopher Mills, and numerous related entities, launched what became an ongoing fraud that sought to raise at least $8.6 million from investors across the country. The Commission alleged that, contrary to what investors were told, proceeds were used to pay back earlier investors; to make payments to Allen, Dowlatshahi, and Mills; and to make payments to Allen-affiliated business, including China Voice.
On June 5, the Honorable Judge Reed O’Connor, United States District Judge, entered a preliminary injunction, which, along with freezing the assets of multiple defendants and relief defendants, prevents the defendants from violating certain provisions of the securities laws, orders the preservation of documents, and requires the defendants to provide an accounting to determine the disposition of investor funds.
The SEC’s complaint charges Allen, Dowlatshahi, Mills, and various related companies with violations of 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 and Rule 10b-5 thereunder. The SEC’s complaint also charges China Voice, its former chairman and CEO William Burbank IV, and Allen for a series of fraudulent statements about China Voice’s financial condition and business prospects, as well as Gerald Patera, Ilya Drapkin, and Robert Wilson for their roles in the scheme, including violations of Section 17(a) of the Securities Act and Section 10(b) of the Securities Exchange Act and Rule 10b-5 thereunder. In addition to the preliminary relief, the SEC’s complaint seeks permanent injunctions, disgorgement, prejudgment interest, and financial penalties against all defendants, as well as penny stock bars against Allen, Burbank, Patera, Drapkin, and Wilson, and officer and director bars against Allen and Burbank.