SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 16432 / February 10, 2000
SECURITIES AND EXCHANGE COMMISSION v. E4ONLINE.COM, INC. AND ARTHUR A. ALONZO, 00 Civ. 1018 (AS)(S.D.N.Y.)
The Securities and Exchange Commission ("Commission") filed a complaint today in the United States District Court for the Southern District of New York against E4online.com, Inc. ("E4online") and Arthur A. Alonzo ("Alonzo"). The complaint charges E4online and Alonzo with making false and misleading statements to investors while offering and selling the common stock of E4online, a purported development-stage Internet retailer. The Commission simultaneously filed an emergency application asking the court, among other things, to temporarily and preliminarily enjoin the defendants from committing the violations alleged in the complaint, freeze the defendants' assets, direct each of the defendants to provide an accounting, permit expedited discovery, and prohibit the destruction of documents.
The Commission's complaint names the following defendants:
Alonzo, 30 years old, resides in Coconut Grove, Florida. He was indicted in June 1999 by a Grand Jury in the Eastern District of New York and charged with various felonies in connection with a separate securities fraud scheme.
E4online is a corporation formed on September 2, 1999 under the laws of the state of Delaware. E4online purports to have principal corporate offices in New York, New York.
The complaint alleges that:
Alonzo, using the name of a registered representative of a broker-dealer, represented to prospective investors that they have the opportunity to purchase E4online stock at $2.00 per share in a "private placement" and that the company planned to issue shares in an initial public offering ("IPO") within a few months at an IPO price of $12.00 per share. In offering materials distributed to prospective investors, the defendants represented that E4online has corporate offices in New York, and made other representations concerning the identities and qualifications of E4online's senior management. These representations were false and misleading because; among other things: there is no basis for Alonzo's statements about an imminent IPO; there is no E4online at its stated address in Manhattan; and at least one person listed as a corporate officer of E4online is not affiliated with the company. Through the scheme, Alonzo and E4online have sought to capitalize on the public perception that many Internet-related stocks appreciate in value after the company engages in an IPO.
As a result of the foregoing, the Commission alleges that Alonzo and E4online committed securities fraud in violation of Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934, and Rule 10b-5 thereunder. In addition to the interim relief sought in the application filed today, the Commission seeks a Final Judgment against Alonzo and E4online among other things: (i) enjoining them from future violations of the above-cited provisions; (ii) requiring the disgorgement of all of their ill-gotten gains, plus pre-judgment interest; and (iii) assessing civil penalties against them. The Commission's suit remains pending.