Securities and Exchange Commission
Litigation Release No. 17865 / November 26, 2002
Ari Parnes and Five Other Defendants Enjoined in SEC Enforcement Action
Defendants to Pay $890,000
Securities and Exchange Commission v. Ari Parnes, ADAR Equities, LLC, Shauel Seitler, Jacob Herman, Yezhak Dov Knoll, and Myron Raisman, 01 Civ. 0763 (LLS) (S.D.N.Y.)
The Securities and Exchange Commission announced today that it obtained permanent injunctions against all six defendants in this Commission enforcement action, and an order that the defendants pay a total of $890,000. The defendants are Ari Parnes; Parnes' company ADAR Equities, LLC; two ADAR employees, Shauel Seitler and Jacob Herman; former Datek Securities broker Yezhak Dov Knoll; and lawyer Myron Raisman. U.S. District Court Judge Louis L. Stanton entered final judgments against the defendants on November 7, 2002.
The Commission's complaint alleged two different schemes-an illegal offering scheme and a bank stock fraud scheme. The first scheme took illegal advantage of Regulation S, which permits U.S. issuers to offer and sell securities without registration to offshore investors under certain circumstances. The Commission's complaint alleged that Parnes, aided by employees at his company ADAR Equities, including Herman and Seitler, and by Datek Securities broker Knoll, used Reg S offerings to reap illegal profits for himself and others, in violation of the securities registration provisions of the Securities Act of 1933 ("Securities Act"). The complaint also alleged that without registering as brokers or dealers, Parnes, Herman, and Seitler, on behalf of ADAR, participated in private placements of the securities of twelve issuers in violation of the broker-dealer registration provisions of the Securities Exchange Act of 1934 ("Exchange Act").
The Court, in connection with the allegations related to the first scheme, permanently enjoined Parnes, Seitler, and Herman from violating Sections 7(f) and 15(a) of the Exchange Act and Sections 5(a) and 5(c) of the Securities Act, permanently enjoined ADAR from violating Section 15(a) of the Exchange Act and Sections 5(a) and 5(c) of the Securities Act, and permanently enjoined Knoll from violating Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and Sections 5(a) and 5(c) of the Securities Act. The defendants consented, without admitting or denying the allegations, to the entry of the final judgments.
In a related administrative action, Knoll, without admitting or denying the Commission's findings, consented to the entry of a Commission order barring him from association with any broker or dealer with the right to reapply after three years.
With respect to the second scheme, involving bank stock fraud, the Commission's complaint alleged that Parnes, aided by Raisman, profited by illegally buying subscription rights from depositors of banks converting from mutual to stock form. The Court, in connection with the allegations related to the second scheme, permanently enjoined Parnes and Raisman from violating Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. The defendants consented, without admitting or denying the allegations, to the entry of the final judgments.
In addition to the permanent injunctions, the Court ordered Parnes to pay a total of $650,000, including disgorgement, prejudgment interest and a civil penalty, ordered ADAR, Seitler, Herman and Raisman each to pay a $50,000 civil penalty and ordered Knoll to pay a $40,000 civil penalty.
These judgments conclude the Commission's civil litigation in this matter.