SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 16475 / March 20, 2000
Securities Exchange Commission v. DynamicDaytrader.Com L.L.C. and David A. Rudnick, C.A. No. 00-85-PC (D. Me.) (Filed on March 20, 2000)
SEC Charges Operator of Internet Daytrading Website With Securities Fraud
The Securities and Exchange Commission ("Commission") today announced the filing and settlement of civil fraud charges against David A. Rudnick ("Rudnick"), operator of an Internet website that provided real-time daytrading stock recommendations on a subscription basis, and Rudnick's company, DynamicDaytrader.com LLC ("DynamicDaytrader"). The staff alleged that Rudnick, a resident of Cumberland Foreside, Maine, and DynamicDaytrader violated the general and investment adviser antifraud provisions of the federal securities laws by posting false and misleading statements on the website. Rudnick and DynamicDaytrader have agreed, without admitting or denying the Commission"s allegations, to the entry of a permanent injunction, disgorgement of all ill-gotten gains, plus prejudgment interest, and to the imposition of a civil penalty against DynamicDaytrader.
The Commission's complaint alleges that, during the period from January 1998 to February 2000, Rudnick and DynamicDaytrader operated an Internet website that provided, on a subscription basis, daytrading recommendations. The main feature of the DynamicDaytrader website was a link to a real-time window referred to as the "Trading Floor." Rudnick induced subscribers to trade securities by falsely stating that, through the Trading Floor, they would be able to see the real-time actual trades of a successful daytrader and thus be able to profit or approximate the performance of the trader by merely mimicking his trades. The complaint alleges that the trading recommendations posted on the Trading Floor were not real, but hypothetical, and the prices posted for those trades were not attainable by either Rudnick or his subscribers, thus making the claimed profits unattainable.
The complaint further alleges that Rudnick also falsely claimed that the head trader's recommendations had generated high returns, including a claimed return of more than 747% for calendar year 1999. According to the complaint, the stock prices that Rudnick used in making these performance claims generally were more favorable than those actually available in the marketplace. Rudnick also made false statements about his personal daytrading experience and the DynamicDaytrader organization. According to the Commission's complaint, the DynamicDaytrader website had generated subscription revenues of $40,107 from approximately 315 subscribers in at least 38 states and thirteen countries before suspending operations in February, 2000. By virtue of his conduct Rudnick was an investment adviser.
The complaint alleges that Rudnick's conduct violated Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder and Sections 206(1) and 206(2) of the Investment Advisers Act of 1940. On a neither admit nor deny basis, Rudnick has consented to the entry of a final judgment permanently enjoining him from future violations of those provisions, holding Rudnick and DynamicDaytrader jointly and severally liable for disgorgement in the amount of $40,107, plus prejudgment interest, and imposing a civil monetary penalty against DynamicDaytrader in the amount of $15,000.