U.S. Securities and Exchange Commission
LITIGATION Release No. 16867 / January 23, 2001
Securities and Exchange Commission v. Arash Aziz-Golshani et al., U.S. District Court for the Central District of California (Civil Action No. 99-13139) (CBM)(AJWx)
Securities and Exchange Commission v. Arash Molayem, U.S. District Court for the Central District of California (Civil Action No. 01-00649 )(CBM)(CTx)
THREE SETTLE SEC CHARGES IN NEI WEBWORLD INTERNET STOCK MANIPULATION CASE;
The Commission today announced that Hootan Melamed and Allen Derzakharian, two of three defendants named in the Commission's previously filed NEI Webworld, Inc. Internet stock-price manipulation case, have agreed to settle the case by surrendering substantially all their assets and consenting to the entry of permanent injunctions. The Commission also filed a new action naming a fourth individual, Arash (Danny) Molayem, for participating in the NEI Webworld and other Internet manipulations. Simultaneous with the filing of the Complaint against him, Molayem also consented to the entry of a permanent injunction and agreed to disgorge his trading profits. The Commission's complaint against Arash Aziz-Golshani, the third defendant in the original case, remains pending.
Separately, the United States Attorney for the Central District of California prosecuted Aziz-Golshani and Melamed criminally for their manipulation of NEI Webworld. Aziz-Golshani pled guilty to one count of securities fraud and one count of conspiracy to commit securities fraud. Melamed pled guilty to one count of conspiracy to commit securities fraud. Aziz-Golshani was sentenced on January 22, 2001 to 15 months incarceration, and ordered to pay restitution in an amount to be determined. Melamed was sentenced on January 12, 2001 to 10 months incarceration and ordered to pay restitution in an amount to be determined.
In its original Complaint filed December 15, 1999, the Commission alleged that in November 1999, Aziz-Golshani, Melamed, and Derzakharian manipulated the market for NEI Webworld, Inc., a defunct company that was thinly traded on the NASD Bulletin Board. The Commission alleged that they acquired large blocks of stock for pennies per share, created demand for the stock by disseminating false statements on the Internet that NEI Webworld, Inc. would be acquired by another company, and then sold their stock into the rising market. Aziz-Golshani realized illegal profits of $152,742.50, and Melamed and Derzakharian realized illegal profits of $211,250 in a joint brokerage account. See Lit. Rel. 16391 (December 15, 1999). The Commission sought and obtained preliminary orders freezing the defendants' assets and restraining them from continuing to violate the securities laws. On July 6, 2000, the Commission amended its complaint to allege that from April 1999 to October 1999 Aziz-Golshani had manipulated the prices of eleven other thinly traded stocks by spreading false messages on Internet message boards, and that he reaped approximately $321,000 in additional illegal profits from that activity. See Lit. Rel. 16620 (July 6, 2000). The amended complaint alleged that Melamed participated in two of the additional manipulations, from which he obtained trading profits of $1,928.
In the settlements, which were filed yesterday, Melamed and Derzakharian consented, without admitting or denying the allegations in the amended complaint, to the entry of an order: (1) permanently enjoining them from future violations of the Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder; (2) requiring them jointly and severally to disgorge $211,250 in illegal trading profits, together with prejudgment interest, by surrendering the contents of the joint brokerage account in which they traded NEI Webworld securities. That account had been frozen since the Commission filed its original complaint. Melamed agreed to disgorge an additional $2,066 in profits and prejudgment interest from his trading in the two other securities. Neither Melamed nor Derzakharian will be ordered to pay penalties based on the sworn statements of financial condition that each submitted.
In a new complaint filed yesterday, the Commission also named Molayem and alleged that he participated with others in the NEI Webworld manipulation and five other manipulations of thinly traded companies. That complaint charges that Molayem, like the others, violated Section 17(a) of the Securities Act, Section 10(b) of the Securities Exchange Act and Rule 10b-5 thereunder, and realized illegal trading profits of $16,006. Without admitting or denying the allegations in the complaint, Molayem also agreed to settle the case by consenting to an order: (1) enjoining him from future violations of those provisions of the federal securities laws, (2) requiring him to disgorge his illegal trading profits together with prejudgement interest. Because of Molayem's early and substantial cooperation in the investigation of this matter, the Commission did not seek to freeze his assets, and settled without seeking civil penalties against him.
The Commission acknowledges the assistance of the NASD in the investigation of this matter.http://www.sec.gov/litigation/litreleases/lr16867.htm