U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 19099 / February 24, 2005
SECURITIES AND EXCHANGE COMMISSION v. PETER WARREN AND EXO-BRAIN, INC. (FORMERLY E-BRAIN SOLUTIONS, LLC), Civil Action File No. 1:04-CV-2403 (N.D. Ga.).
FEDERAL COURT ENJOINS PETER WARREN AND EXO-BRAIN, INC. (FORMERLY E-BRAIN SOLUTIONS, LLC) IN FRAUDULENT, UNREREGISTERED OFFERINGS OF SECURITIES
The Securities and Exchange Commission (the "Commission") announced that the Honorable Clarence Cooper, United States District Judge for the Northern District of Georgia, entered separate orders of permanent injunction and other relief against Exo-Brain, Inc. ("Exo-Brain," formerly E-Brain Solutions, LLC) and against Peter Warren, on February 11 and February 17, 2005 respectively. The orders restrained each defendant from further violations of Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. Exo-Brain and Warren were ordered to pay disgorgement, prejudgment interest and civil penalties in amounts to be resolved upon motion of the Commission at a later date. Exo-Brain and Warren consented to the entry of each defendant's respective order without admitting or denying the allegations of the Commission's complaint.
The Commission's complaint alleged that in 2000 and 2001, the defendants raised up to $12.4 million from investors in a series of fraudulent, unregistered offerings of securities. At the time of the conduct alleged in the complaint, Warren was a part time resident of, and Exo-Brain was located in, Chattanooga, Tennessee. Warren controlled E-Brain LLC and Exo-Brain. The complaint alleged that in offering documents, the defendants falsely claimed to have developed a working prototype that could be used to make computers more user friendly, by enabling a person to operate a computer with voice command, and in numerous foreign languages. The defendants also falsely represented that the company had built a launch product or commercially available product when no such product existed, and also misrepresented, among other things, the company's financial situation.
The complaint alleged that the offerings of E-Brain LLC should be integrated into a single unregistered offering because, in part, the offerings did not cease for more than a six month period of time, the sales of securities by E-Brain LLC all shared the same purpose-to fund the software development business controlled by Warren, and E-Brain LLC was involved in a single plan of financing. The complaint further alleged, for several reasons, that the offerings of the successor company Exo-Brain should be integrated with the earlier offerings of E-Brain LLC, which were not exempt from the registration requirements of the Securities Act.
See also: L.R. 18835 (August 18, 2004).