Litigation Release No. 22463 / August 31, 2012
SEC v. Anthony K. Welch, Civil Action No. 1:12-cv-3034 (ND Ga.)
SEC Charges Former Mississippi Investment Adviser, Now Based in Bahamas, With Fraud
On August 31, 2012, the Securities and Exchange Commission filed a civil action in the United States District Court for the Northern District of Georgia against Anthony K. Welch, a former investment adviser formerly of Oxford, Mississippi, with securities fraud in conjunction with a series of false and misleading press releases issued in 2010 by eHydrogen Solutions, Inc. (“eHydrogen”) and ChromoCure, Inc. (“ChromoCure”), two now defunct microcap stock companies. Welch served as Chairman and Chief Executive Officer of the two companies during the relevant period and was responsible for the issuance of the false and misleading press releases of both companies. Welch is now based offshore, most recently in Freeport, Bahamas.
The Commission’s complaint alleges that from at least March 2010 through August 2010, Welch issued a series of press releases and made other public disclosures containing false and misleading information concerning, among other things, technologies acquired by and revenues generated by eHydrogen and ChromoCure. The complaint also alleges that the period of the false and misleading press releases coincided with suspicious price and trading volume increases in the common stock of eHydrogen and ChromoCure, and further alleged that in multiple instances such statements were intentionally false and misleading, distributed by Welch for no purpose other than to incite trading activity and artificially inflate the price and trading volume of eHydrogen and ChromoCure. For example, in a ChromoCure press release dated March 16, 2010, Welch stated among other things, “[t]he Company’s proprietary Chromosomal Scanner systems have proven accurate and efficient in the measurement of the unique genomic characteristic found in 100% of all cancers and never found in normal cells. The Company’s detection technology has been proven to have an effective accuracy of 100% for all cancers at all stages. This is superior to other detection approaches presently employed by pathologists, including biomarker detections, in every measurable way.” The same press release also stated that “[t]he Company’s detecting technology has an effective accuracy of 100% for all cancers at all stages.” The complaint alleges that this representation was false and misleading and that Welch and ChromoCure issued the statement without any reasonable basis for it, because in reality no 100% accurate cancer detection system is known to exist in the world.
The Complaint alleges that Defendant Welch, by virtue of his conduct, directly or indirectly, has engaged and, unless enjoined, will engage in violations of Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") [15 U.S.C. § 78j(b)] and Rule 10b-5 thereunder [17 C.F.R. § 240.10b-5]. Welch also has liability as a controlling person, pursuant to Section 20(a) of the Exchange Act for violations by eHydrogen and ChromoCure of Section 10(b) of the Exchange Act and Rule 10b-5(b) thereunder. Welch is alternatively charged herein with aiding-and-abetting the antifraud violations of eHydrogen and ChromoCure. The Commission seeks a permanent injunction against Welch for fraud, an accounting, disgorgement plus prejudgment interest, civil penalties, a penny stock bar and an officer and director bar.