Microcap Attorney Settles Charges Related to Shell Factory Scheme
Litigation Release No. 24552 / August 6, 2019
Securities and Exchange Commission v. Imran Husain, et al., Civil Action No. 2:16-cv-03250-ODW-E (C.D. Cal.)
The Securities and Exchange Commission announced today the entry of a final judgment against New Jersey lawyer Gregg E. Jaclin for running a fraudulent shell factory scheme through which sham companies were taken public and sold for a profit. Jaclin has also been permanently suspended from appearing and practicing before the SEC as an attorney.
In May 2016, the SEC charged Jaclin and Imran Husain of Santa Monica, California with running the shell factory scheme. As alleged in the SEC's November 2016 amended complaint Husain and Jaclin created nine shell companies and sold seven using essentially the same pattern. Husain and Jaclin filed registration statements for initial public offerings, falsely claiming that a particular business plan would be implemented and that private investors had already purchased shares of the companies' stocks. Deliberately omitted from the registration statements was any mention of Husain's control of the company. Husain and Jaclin filed quarterly and annual reports, signed by a puppet CEO, which repeated many of the false and misleading statements in the registration statements. The SEC previously issued stop orders and suspended the registration statements of the last two created companies - Counseling International and Comp Services - before investors could be harmed and the companies could be sold.
On May 18, 2017, a federal grand jury returned an indictment against Jaclin on charges related to the shell factory scheme and with obstruction of justice of two SEC investigations.
Without admitting or denying the allegations of the complaint, Jaclin has consented to the entry of a judgment permanently enjoining him from violating the antifraud provisions of Section 17(a) of the Securities Act of 1933 ("Securities Act") and Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder and the registration provisions of Sections 5(a) and 5(c) of the Securities Act, and aiding and abetting violations of Section 15(d) of the Exchange Act and Rules 12b-20, 15d-1, and 15d-13 thereunder. The judgment also orders Jaclin to pay $40,473 in disgorgement and prejudgment interest and imposes a penny stock bar. No civil penalty was imposed in light of Jaclin's anticipated sentence in the parallel criminal action.
Separately, without admitting or denying the allegations, Jaclin agreed to the entry of an order permanently suspending him from appearing and practicing before the SEC as an attorney. The order prohibits Jaclin from representing clients in SEC matters, including investigations, litigation, or examinations, and from advising clients about SEC filing obligations or content. The litigation against Husain is ongoing.
The SEC's investigation was conducted by Roberto A. Tercero and Spencer E. Bendell as part of the Microcap Fraud Task Force. The SEC's litigation is led by Amy J. Longo. The SEC appreciates the assistance of the FBI and the United States Attorney's Office for the Northern District of California.