U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 18988 / December 2, 2004
SEC v. Discover Capital Holdings Corp., et al., 03 Civ. 1496 (RMC) (D.D.C., filed July 9, 2003)
DISCOVER CAPITAL HOLDINGS, DINOV BROTHERS TO PAY $706,000 IN STOCK FRAUD CASE; DINOVS BARRED FROM INDUSTRY
On November 19, 2004, the Honorable Judge Rosemary M. Collyer of the United States District Court for the District of Columbia entered final judgments against Discover Capital Holdings Corp., Indianapolis Securities, Inc., and Eli and Ari Dinov, arising from charges that they participated in the fraudulent, unregistered offering of Discover Capital's preferred shares. Without admitting or denying the allegations of the Commission's complaint, Discover Capital and the Dinov brothers agreed to pay a total of $706,459 in disgorgement, penalties, and prejudgment interest, including a $120,000 penalty imposed on Ari Dinov. In addition, the four defendants consented to being permanently enjoined from violating the antifraud and registration provisions of the federal securities laws, and Eli and Ari Dinov consented to being barred from acting as officers or directors of a public company. In related proceedings, the Commission issued an administrative order on December 1, 2004, to which Eli and Ari Dinov consented, barring them from associating with any broker or dealer.
Specifically, Discover Capital, Indianapolis Securities and the Dinovs consented to the entry of final judgments permanently enjoining them from violating Sections 5 and 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder.
The Commission's complaint, filed on July 9, 2003, alleges that the defendants, Eli Dinov, his brother Ari Dinov, and David Rubin used spam e-mail touts and misleading, high pressure sales calls to raise $1.1 million dollars through the sale of private placement shares of Uniondale, New York-based Discover Capital, a company controlled by the individual defendants, through Discover's wholly owned broker-dealer subsidiary, Indianapolis Securities.
The money to be paid in connection with these final judgments, together with the $462,000 in disgorgement, penalty, and pre-judgment interest which co-defendant David Rubin was ordered to pay in March 2004, brings the total amount to be paid by the defendants in this case to over $1.1 million.