SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 16382 / December 9, 1999
UNITED STATES V. AMERICO GALLO, U.S. District Court, S.D.N.Y., 99-CR-1471 (DLC)
The Securities and Exchange Commission ("Commission") announced that on December 3, 1999, United States District Judge Denise L. Cote sentenced Americo R. Gallo ("Gallo") to a prison term of 41 months and restitution to investors of $832,000. Gallo, a former registered representative and resident of Brooklyn, New York, was prosecuted by the Office of the United States Attorney for the Southern District of New York. Gallo pleaded guilty to one count of conspiracy to commit securities fraud in June 1999.
Gallo was prosecuted for some of the same conduct that underlies a civil complaint filed by the Commission against Gallo, Sharon Harosh, and three companies, Traderz Associates Holding Inc. ("Traderz Associates"), Blackwell Co. ("Blackwell"), and Goldman Lender & Co. Holdings ("Goldman Lender").
In its complaint, which was filed in October 1998, the Commission alleges that Gallo, the president of Traderz Associates, defrauded investors in connection with a purported private placement of stock of Traderz Associates. The complaint alleges that Gallo solicited investors and Gallo misrepresented to them, among other things, that Traderz Associates' stock would be registered with the Commission and publicly traded in a few months, at which time the stock price would double or triple from the private placement price. The complaint further alleges that Gallo misappropriated a significant portion of the offering proceeds and gave other large sums to colleagues soliciting investors to buy Traderz Associates stock.
The Commission's complaint also alleges that Harosh, or his agents, made misrepresentations in soliciting investors to purchase the stock of Blackwell and Goldman Lender that were similar to those made by Gallo in the sale of Traderz Associates stock. A number of investors who invested in Traderz Associates were later solicited to invest in Blackwell or Goldman Lender, and investors received similar private placement memoranda for the three companies.
The Commission's action, which alleges that the defendants violated 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, remains pending in the United States District Court for the Southern District of New York. The Commission was previously granted an asset freeze for funds collected from investors, a preliminary injunction, and the appointment of a temporary receiver for the companies.
For further information about the Commission's action, see Litigation Release No. 15947.