SEC News Digest

ENFORCEMENT PROCEEDINGS

Commission Revokes Registration of Securities of Orderpro Logistics, Inc. (n/k/a Securus Renewable Energy, Inc.) for Failure to Make Required Periodic Filings

On March 30, 2010, the Commission revoked the registration of each class of registered securities of Orderpro Logistics, Inc. (n/k/a Securus Renewable Energy, Inc.) (SERW) for failure to make required periodic filings with the Commission.

Without admitting or denying the findings in the Order, except as to jurisdiction, which it admitted, SERW consented to the entry of an Order Making Findings and Revoking Registration of Securities Pursuant to Section 12(j) of the Securities Exchange Act of 1934 as to Orderpro Logistics, Inc. (n/k/a Securus Renewable Energy, Inc.) finding that it had failed to comply with Section 13(a) of the Securities Exchange Act of 1934 (Exchange Act) and Rules 13a-1 and 13a-13 thereunder and revoking the registration of each class of SERW's securities pursuant to Section 12(j) of the Exchange Act. This order settled the charges brought against SERW in In the Matter of Aspen Group Resources Corp., et al., Administrative Proceeding File No. 3-13824.

Brokers and dealers should be alert to the fact that Exchange Act Section 12(j) provides, in pertinent part, as follows:

No member of a national securities exchange, broker, or dealer shall make use of the mails or any means or instrumentality of interstate commerce to effect any transaction in, or to induce the purchase or sale of, any security the registration of which has been and is suspended or revoked . . . .

For further information see Order Instituting Administrative Proceedings and Notice of Hearing Pursuant to Section 12(j) of the Securities Exchange Act of 1934, In the Matter of Aspen Group Resources Corp., et al., Administrative Proceeding File No. 3-13824, Exchange Act Release No. 61740 (March 19, 2010). (Rel. 34-61799; File No. 3-13824)

In the Matter of John Farahi

On March 30, 2010, the Commission issued an Order Instituting Administrative Proceedings Pursuant to Section 15(b) of the Securities Exchange Act of 1934, Making Findings and Imposing Remedial Sanctions (Order) against John Farahi (Respondent). The Order finds that on March 9, 2010, a judgment was entered against Respondent in SEC v. NewPoint Financial Services, Inc., et al. (Civil Action No. 10-0124 DDP (JEMx)) (C.D. Cal.), permanently enjoining him from future violations of Sections 5 and 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder.

The Order further finds that the Commission's complaint in SEC v. NewPoint Financial Services, Inc., et al. alleged that, in connection with the offer and sale of securities of NewPoint Financial Services, Inc., Respondent falsely represented to investors that the investments were low risk and that the funds raised would be used to invest in FDIC insured certificates of deposit, government bonds, and/or corporate bonds issued by companies backed by funds from the Troubled Asset Relief Program. The Commission's complaint also alleged that Respondent used the money raised to, among other things, fund the construction of his personal residence in Beverly Hills, California and trade in risky stock options futures.

Based on the above, the Order bars Respondent from association with any broker or dealer. Respondent consented to the issuance of the Order without admitting or denying any of the findings except as to the entry of the final judgment. (Rel. 34-61801; File No. 3-13838)

SEC Obtains Summary Judgment Against Computer Hacker for Insider Trading

On March 24, 2010, the U.S. District Court for the Southern District of New York granted the Commission's motion for summary judgment against Oleksandr Dorozhko, a Ukrainian citizen who traded in the securities of IMS Health Inc. based on information that he unlawfully obtained through computer hacking. The District Court, among other things, permanently enjoined Dorozhko from violating the antifraud provisions of the federal securities laws and ordered the defendant to pay approximately $580,000 in disgorgement, prejudgment interest, and a civil penalty.

On Jan. 7, 2008, the District Court denied the Commission's motion for a preliminary injunction and concluded that hacking and trading does not amount to a violation because Dorozhko did not breach a fiduciary duty in connection with the purchase and sale of a security. SEC v. Dorozhko, 606 F. Supp. 2d 321 (S.D.N.Y. 2008). On appeal, the United States Court of Appeals for the Second Circuit reversed the District Court's decision and held that computer hacking may be deceptive even where the hacker did not breach a fiduciary duty in obtaining inside information because misrepresenting one's identity to gain access to, and steal, inside information is plainly deceptive. SEC v. Dorozhko, 574 F.3d 42 (2d Cir. 2009). The Second Circuit remanded the case to the District Court, which granted the Commission's motion for summary judgment.

For further information, see Litigation Release No. 20349. [SEC v. Oleksandr Dorozhko, Civil Action No. 07 Civ. 9606 (NRB) (S.D.N.Y.)] (LR-21465)

SEC Settles Fraud Charges Against Two Employees of an Investment Adviser

The Securities and Exchange Commission announced today that on March 26, 2010, the Honorable P. Kevin Castel, United States District Judge for the Southern District of New York, entered final judgments against defendants Brian Travis and Nicholas Vulpis in SEC v. Brian Travis, et al., 09 CV 2288.

The Commission's complaint alleged that from March 2003 to October 2005, Travis and Vulpis, two employees of investment adviser JLF Asset Management LLC, solicited and accepted bribes from registered representatives of broker-dealers. The bribes took the form of payments for expensive travel, rent for a personal residence, and daily car service. In exchange for those bribes, Travis and Vulpis directed trades, and the resulting commissions, to those broker-dealers paying the bribes. Travis and Vulpis did not disclose these bribes or the material conflict of interest that they created to the investment adviser, defrauding the hedge funds that JLF advised.

In connection with the settlement, Travis consented, without admitting or denying the allegations in the Commission's complaint, to an order permanently enjoining him against future violations of Section 17(a) of the Securities Act of 1933, Section 10(b) of the Exchange Act of 1934 and Rule 10b-5 thereunder, and Sections 206(1) and 206(2) of the Investment Advisers Act of 1940, to pay disgorgement of $107,965, prejudgment interest of $35,029, and a penalty of $107,965.

In connection with the settlement, Vulpis consented, without admitting or denying the allegations in the Commission's complaint, to an order permanently enjoining him against future violations of Section 17(a) of the Securities Act of 1933, Section 10(b) of the Exchange Act of 1934 and Rule 10b-5 thereunder, and Sections 206(1) and 206(2) of the Investment Advisers Act of 1940, to pay disgorgement of $105,450, prejudgment interest of $32,381, and a penalty of $100,000.

For further information, see Litigation Release Nos. 20948 (Mar. 12, 2009) and 21390 (Jan. 22, 2010). [SEC v. Brain Travis, et al., Civil Action No. 09-10073 (S.D.N.Y.)] (LR-21466)

SEC Obtains Final Judgments Against Two Defendants in Hedge Fund Ponzi Scheme

The Commission announced that on March 30, 2010, the Honorable Richard M. Berman of the United States District Court for the Southern District of New York entered final judgment against defendants James M. Nicholson and Westgate Capital Management, LLC. The final judgment permanently enjoins them from violating Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, Sections 206(1), 206(2) and 206(4) of the Investment Advisers Act and Rule 206(4)-8 thereunder. In addition, the final judgment provides that in the event restitution is not ordered in the criminal proceeding captioned United States v. Nicholson, 1:09-cr-414 (S.D.N.Y.) (RJS), Nicholson will pay appropriate disgorgement, prejudgment interest and civil penalties at a later date. Nicholson and Westgate consented to the entry of the final judgment without admitting or denying the allegations in the Commission's complaint.

The Commission commenced this action on an emergency basis in February 2009 by charging Westgate, a Pearl River, New York-based investment adviser, and James Nicholson, its founder and president, with operating a Ponzi-style scheme through eleven unregistered hedge funds. Criminal authorities arrested Nicholson and charged him with securities fraud, among other things, on the same day. Nicholson has been incarcerated since his arrest. The Commission's complaint alleges that Nicholson sold interests in eleven hedge funds based upon material misstatements and omissions about the funds' investment success and size. While Nicholson had claimed to manage between $600 million and $900 million through Westgate, those claims were wildly overblown. Westgate did raise roughly $290 million from investors on the basis of material misstatements and omissions.

Nicholson has pleaded guilty to charges in the parallel criminal action and is scheduled to be sentenced on June 30, 2010.

The Commission acknowledges the assistance and cooperation of the United States Attorney's Office for the Southern District of New York and the Federal Bureau of Investigation. [SEC v. James M. Nicholson, et al., Civil Action No. 1:09-cv-1748 (S.D.N.Y.) (RMB)] (LR-21467)

SELF-REGULATORY ORGANIZATIONS

Proposed Rule Changes

The Commission published notice of a proposed rule change (SR-CBOE-2009-021) submitted by the Chicago Board Options Exchange pursuant to Rule 19b-4 under the Securities Exchange Act of 1934 relating to correlated instrument delta hedge exemption. Publication is expected in the Federal Register during the week of March 29. (Rel. 34-61785)

The Commission issued a notice of filing of a proposed rule change by the Municipal Securities Rulemaking Board pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934, consisting of amendments to MSRB Rule G-34, CUSIP Numbers and New Issue Requirements, to enhance the interest rate and descriptive information currently collected and made transparent by the MSRB on municipal auction rate securities and variable rate demand obligations (SR-MSRB-2010-02). Publication is expected in the Federal Register during the week of March 29. (Rel. 34-61793)

Immediate Effectiveness of Proposed Rule Changes

A proposed rule change (SR-NASDAQ-2010-037) filed by The NASDAQ Stock Market to modify Rule 5605(c), which contains the audit committee charter requirements, to eliminate an outdated reference to Independence Standards Board Standard 1 has become effective under Section 19(b)(3)(A) of the Securities Exchange Act of 1934. Publication is expected in the Federal Register during the week of March 29. (Rel. 34-61789)

The National Securities Clearing Corporation filed a proposed rule change (SR-NSCC-2010-04) under Section 19(b)(1) of the Exchange Act, which rule change became effective upon filing, to set the effective date for the elimination of NSCC's guaranty of payment with respect to its Envelope Settlement Service. Publication is expected in the Federal Register during the week of March 29. (Rel. 34-61798)

Approval of Proposed Rule Changes

The Commission issued an order granting approval of a proposed rule change (SR-Phlx-2010-20) submitted by NASDAQ OMX PHLX pursuant to Rule 19b-4 under the Securities Exchange Act of 1934, to expand the number of components in the PHLX Semiconductor Sector known as SOX, on which options are listed and traded. Publication is expected in the Federal Register during the week of March 29. (Rel. 34-61796)

The Commission issued an order approving a proposed rule change, as modified by Amendments No. 1 and 3 thereto, submitted by NASDAQ OMX BX (SR-BX-2010-009) pursuant to Rule 19b-4 under the Securities Exchange Act of 1934 relating to the directed order process on the Boston Options Exchange Facility. Publication is expected in the Federal Register during the week of March 29. (Rel. 34-61797)

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