U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 19551 / February 2, 2006
Securities and Exchange Commission v. Wallace Nakano, Misc. Action No. 406-MC-007-A /Northern District of Texas (Fort Worth Division)
On February 1, 2006, the Securities and Exchange Commission filed an action in Fort Worth federal district court to enforce subpoenas issued to Wallace Nakano. The Commission alleges that Nakano operated professional poker player Doyle Brunson’s personally endorsed website. Brunson’s website first announced his unsolicited offer to buy WPT Enterprises, Inc., the publicly traded owner of the World Poker Tour, at a high premium over its then-market value.
The Commission claims that publication of Brunson’s offer triggered a steep rise in WPT’s stock price on record trading volume. When WPT publicly disclosed Brunson’s refusal to provide additional details about the offer, its stock price sharply declined, costing investors tens of millions of dollars in lost market value. Brunson’s offer eventually expired by its terms.
The Commission is formally investigating whether Brunson’s offer and its publication violated federal securities laws, including the antifraud provisions of Sections 10(b) and 14(e) of the Securities Exchange Act of 1934. As part of the investigation, the Commission twice served subpoenas on Nakano at his Long Beach, California residence. Although Nakano received the Commission’s subpoenas and, in fact, hired an attorney to contact the Commission’s staff, Nakano has refused to comply, claiming the Commission’s service was “defective.” The court has not yet set the Commission’s action for hearing.