U.S. Securities and Exchange Commission
Litigation Release No. 17268 / December 12, 2001
SECURITIES AND EXCHANGE COMMISSION v. PACKETSWITCH.COM, INC. AND STEVEN A. RISTAU, United States District Court for the Northern District of California, Civil Action No. 01-20626 (RMW)
Judge Orders Permanent Injunction Against Fraudulent Internet Technology Company Sued by SEC
The Securities and Exchange Commission announced that on December 10, 2001, the Honorable Ronald M. Whyte, United States District Judge for the Northern District of California, ordered that PacketSwitch.Com, Inc., a San Jose, California company that is alleged to have raised more than $3.7 million by fraudulently claiming that the company had a proprietary technology for broadcasting movies wirelessly over the Internet, be permanently enjoined from violations of the registration and anti-fraud provisions of the securities laws. The company consented to the entry of the injunction without admitting or denying the allegations of the Commission's complaint.
The Commission's complaint, filed on July 9, 2001, alleges that from at least February 1999 through September 2000, PacketSwitch.Com and its founder and former CEO, Steven A. Ristau, fraudulently raised funds from at least 700 investors. According to the complaint, Ristau knew many of the investors through his relationships with large churches in the San Jose area. Among other things, the defendants told investors that PacketSwitch.Com:
According to the complaint, each of these claims was false. In particular, the complaint alleges, PacketSwitch.Com was a start-up company with no revenue and no real product and its purported technology was simply an off-the-shelf commercial product that did not have the capability of broadcasting movies wirelessly over the Internet.
The complaint further alleges that the defendants failed to disclose that a significant portion of the funds raised went to finance Ristau's lavish lifestyle. This includes more than $550,000 that went towards the purchase of a $1.8 million home in San Jose, as well as funds used to pay for Ristau's family vacation to Hawaii, his delinquent child support, his personal bodyguards, Lexus automobile, and other personal items
PacketSwitch.Com consented to entry of the Court's injunction from future violations of the registration and antifraud provisions of the federal securities laws, Sections 5 and 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder.