U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 19524 / January 6, 2006
SEC v. eWealth Securities, Inc., et al., (S.D.N.Y. 02 Civ. 8626 (JES))
SEC Obtains Final Judgments Against Officer and Registered Representative of Broker-Dealer in $9 Million Offering Fraud
The Commission today announced that on October 21, 2005 and December 27, 2005, the Honorable John E. Sprizzo of the U.S. District Court for the Southern District of New York issued Final Judgments of Permanent Injunction and Other Relief against Steven Mastrosimone ("Mastrosimone") and Neil Formisano ("Formisano"), requiring them to collectively pay over $15 million in disgorgement, prejudgment interest and civil penalties. The Court entered the final judgments after granting the Commission's motion for summary judgment as to all claims against Mastrosimone and Formisano.
The Commission's complaint, filed on October 29, 2002, alleges that Mastrosimone, Formisano and others fraudulently obtained over $7 million from approximately 100 investors in the offering of unregistered eWealth Holdings, Inc. ("eWealth") securities. The complaint alleges Mastrosimone and Formisano deceived actual and prospective investors from January 2000 through September 2002 by claiming that eWealth, a company controlled by Formisano, was on the verge of launching an IPO. According to the complaint, eWealth never filed a registration statement with the Commission or otherwise took any steps toward an IPO. The complaint also alleges that Mastrosimone and Formisano made baseless projections that eWealth stock would trade at 4 to 5 times its offering price on the secondary market. Mastrosimone and Formisano are further alleged to have misrepresented, among other things, key facts concerning eWealth's management, its use of investor proceeds, and its business activities.
The judgments: (i) permanently enjoin Mastrosimone and Formisano from future 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 ("Exchange Act") and Rule 10b-5 thereunder; (ii) bar Mastrosimone and Formisano from participating in any future offering of penny stocks; (iii) permanently enjoin Formisano from aiding and abetting future violations of Sections 17(a) and 17(b) of the Exchange Act, and Rule 17a-4(j) thereunder; (iv) require Formisano to pay $9,798,950 (representing the total funds raised in the fraud) in disgorgement, plus $3,907,300.62 in prejudgment interest, and $550,000 in civil penalties; and (v) require Mastrosimone to pay $386,638 in disgorgement, plus $154,170.71 in prejudgment interest, and $330,000 in civil penalties.
Previously, Mastrosimone and Formisano each pleaded guilty to securities fraud and conspiracy to commit securities fraud, mail fraud and wire fraud based on the same underlying facts alleged in the Commission's complaint. On November 20, 2003 Formisano was sentenced to 78 months incarceration and ordered to pay restitution in the amount of $9,798,950. On July 31, 2003, Mastrosimone was sentenced to forty-six (46) months incarceration and ordered to pay $386,638 in restitution. Any payments that Mastrosimone or Formisano make towards their criminal restitution orders will be credited against disgorgement ordered in the final judgments.
For more information see Litigation Release Nos. 17810 and 17906.