UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 16621 / July 6, 2000
SEC v. REFAEL SHAOULIAN, U.S. District Court for the Central District of California, Civ. Action No. 00-04614 (CBM) (C. D. Cal. May 3, 2000) as amended (July 6, 2000)
The Securities and Exchange Commission announced that on May 3, 2000, the U.S. District Court for the Central District of California issued a temporary restraining order against 24 year-old Refael Shaoulian ("Shaoulian") barring him from violations of the antifraud provisions of the federal securities laws. The Court, also on May 3rd, issued an asset freeze against Shaoulin and his father, Samuel Shaoulian.
In its original complaint filed on May 3rd ("Original Complaint"), the Commission alleged that Shaoulian used the Internet to manipulate the price of a thinly traded stock by spreading false information to various Internet message boards, allowing him to reap more than $172,000 in trading profits. The Original Complaint, also named Shaoulian's father, Samuel Shaoulian, as a relief defendant based on his receipt of ill-gotten gains from the manipulation. Based upon evidence of additional manipulations by Shaoulian, on July 6, 2000, the Commission filed an amended Complaint ("Amended Complaint") charging that from April 1999 through July 1999, Shaoulian engaged in virtually identical Internet pump and dump schemes involving four additional stocks. With these four additional stock manipulations charged against Shaoulian, the Commission is seeking more than $388,000 in disgorgement from Shaoulian, his father and brother, as well as civil penalties against Shaoulian. The Amended Complaint also names Shaoulian's brother, Rabin Shaoulian of Beverly Hills, as a relief defendant because he received some of the ill-gotten gains from the manipulations.
According to the Commission's Original Complaint, in January 2000, Shaoulian manipulated the common stock price of Universal Standard Healthcare, Inc. ("Universal"), a stock traded through the NASD's OTC Bulletin Board system, by posting numerous false messages on Internet message boards. The Complaint alleges that Shaoulian, a 24 year-old Beverly Hills resident and UCLA graduate, obtained more than $172,000 in profits from his Internet pump and dump manipulation of Universal stock. Shaoulian did so by first buying a large block of Universal shares between January 24 and 26, 2000. According to the Complaint, during the weekend of January 29th and 30th, Shaoulian posted hundreds of messages, under multiple pseudonyms, to Internet financial message boards using publicly available computers located on the UCLA campus. These messages falsely stated that Universal was about to be purchased by another company and that Universal was profitable. In fact, Universal had ceased all operations in August 1999, when it filed for Chapter 7 bankruptcy protection. Universal's stock price closed at $0.03 per share on January 21, 2000, and peaked at $1.50 per share within the opening hour of trading on January 31st, before declining precipitously. On January 31 and February 1, 2000, Shaoulian sold all his Universal shares for a $172,690 profit. After Shaoulian's Internet message campaign ended, Universal's price plummeted. Based on this conduct, the Commission in its Complaint sought a temporary restraining order and a preliminary and permanent injunction barring Shaoulian from future violations of the antifraud provisions of the federal securities laws, disgorgement of ill-gotten gains, and civil monetary penalties. On May 11th, the Court, with Shaoulian's consent, entered a preliminary injunction against him and continued the asset freeze.
The Amended Complaint alleges that Shaoulian manipulated the stock of: iChargeit, Inc., Worldtradeshow.com, Inc., Casino Pirata.com Ltd. and E*TwoMedia.com, Inc. Each of these stocks traded on the OTC Bulletin Board at the time of these manipulations. In each instance, the Commission alleges that Shaoulian purchased a substantial block of shares in these companies, posted hundreds of false messages about each company to various Internet message boards using publicly available computers at the campuses of UCLA and the University of Southern California and then sold his own shares into the buying surge prompted by the false Internet messages. In each instance, Shaoulian obtained substantial profits.
In a related action, the Commission today announced civil charges against two other individuals who, it alleged, participated in the manipulations of iChargit, Worldtradeshow.com, Casino Parata.com, E*TwoMedia.com and other issuers. See, SEC v. Aziz Golshani, et al., Civ. Action No. 99-13139 (CBM)(AJWx)(C.D. Cal.) Lit. Rel 16620 (July 6, 2000).
The Commission thanks the NASD for its assistance in this matter.