In the Matter of AMERECO, Inc.
On November 1, an Administrative Law Judge issued an Order Making Findings and Revoking Registrations by Default as to Six Respondents (Default Order) in AMERECO, Inc., Administrative Proceeding No. 3-14075, as to AMERECO, Inc., American Atlas Resources Corp., American Consolidated Growth Corp., AmeriKing, Inc., Ametech, Inc., and Ampace Corp. The Default Order finds that these six Respondents failed to comply with Section 13(a) of the Securities Exchange Act of 1934 (Exchange Act) and Exchange Act Rules 13a-1 and 13a-13 because each Respondent failed to make periodic filings with the Commission for a number of years. Based on these findings, the Default Order, pursuant to Section 12(j) of the Exchange Act, revokes the registration of each class of registered securities of each of these companies. (Rel. 34-63216; File No. 3-14075)
In the Matter of Mazhar Ul Haque
On November 1, the Commission issued an Order Instituting Cease-and-Desist Proceedings Pursuant to Section 8A of the Securities Act of 1933, Making Findings, and Imposing a Cease-and-Desist Order (Order) against Mazhar Ul Haque. The Order finds that from at least 2006 through mid-2008, Haque violated the registration provisions of the Securities Act in connection with the distribution of shares of Veltex Corp., an apparel company with purported operations in the U.S., Canada, and Bangladesh. Beginning in at least 2006, Veltex's CEO, Javeed Matin, enlisted Haque as a figurehead over a company Matin owned, Wilshire Equity, Inc., and then funneled millions of Veltex shares to Wilshire Equity in an unregistered offering. Wilshire Equity then immediately resold the stock to the public, thereby acting as underwriters. Haque signed subscription agreements that warranted, among other things, that Wilshire Equity was not acquiring the shares in order to immediately resell them. Contrary to his representations, Haque, at Matin's direction, caused Wilshire Equity to sell Veltex shares immediately upon receiving the same. During the relevant time period, Wilshire Equity sold about 8.5 million shares of Veltex, usually within days of receiving the shares, generating sales proceeds of approximately $6.5 million.
Based on the above, the Order orders that Haque cease and desist from committing or causing any violations and any future violations of Sections 5(a) and 5(c) of the Securities Act. Haque consented to the issuance of the Order without admitting or denying any of the findings in the Order. (Rel. 33-9155; File No. 3-14103)
SEC Obtains Emergency Relief Against Alleged Perpetrators of Fraudulent Promissory Note Offering
On October 28, the Securities and Exchange Commission filed a civil action in the United States District Court for the Northern District of Illinois, Eastern Division, against Brewer Financial Services, LLC (BFS), a registered broker-dealer, Brewer Investment Advisors, LLC (BIA), a registered investment adviser, Brewer Investment Group, LLC (BIG), BFS and BIA's parent holding company, and their managing principals/officers, Steven Brewer and Adam Erickson, for allegedly participating in a fraudulent offering of promissory notes. BFS, BIA, and BIG are based in, and Brewer and Erickson reside in, Chicago, Illinois.
The Complaint alleges that, from June 2009 through at least September 2010, the defendants raised approximately $5.6 million from 74 investors who invested in promissory notes issued by an Isle of Man company. Although investors were told that their money would be used to repay certain debts of the issuer's parent company, and thereby release assets that would be used to secure their promissory note obligations, the Complaint alleges that nearly all of the offering proceeds were transferred to BIG and its subsidiaries. According to the Complaint, in addition to misrepresenting the manner in which the offering proceeds would be used, the defendants failed to tell investors that BIG and its subsidiaries were in a precarious financial state. In addition to sustaining substantial operating losses from the inception of the offering through the present, BIG had failed to make required interest payments to investors by July 1, 2010, and had failed to meet its own payroll obligations by August 2010. The Complaint alleges that, notwithstanding, and without disclosing, this material information, the defendants continued selling promissory notes to new investors for at least three additional months. According to the Complaint, the note offerings were not registered with the Commission.
The Complaint claims that, based on this conduct, all of the defendants violated 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. The Complaint also claims that BFS violated, and Brewer and Erickson aided and abetted the violation of, Exchange Act Section 15(c), and that BIA violated, and Brewer and Erickson aided and abetted the violation, Sections 206(1) and 206(2) of the Investment Advisers Act. On the Commission's motion, and upon the consent of all defendants, the Court issued Preliminary Injunctions and an Order Imposing Asset Freeze and Other Ancillary Relief (Order) on October 29, 2010. Among other things, the Court's Order froze certain bank accounts of defendants BIG and BFS. [SEC v. Steven Brewer, Adam Erickson, Brewer Investment Group, LLC, Brewer Financial Services, LLC, and Brewer Investment Advisors, LLC, Case 10-cv-06932 (BMM) (N.D. Ill.)] (LR-21715)
Judgment of Permanent Injunction and Other Relief Entered Against Defendants Bimini Reef Real Estate, Inc., Christopher L. Astrom, Riverview Capital Inc. and Damian B. Guthrie
The Commission announced that on October 25, 2010, the Honorable John E. Steele, United States District Court Judge for the Middle District of Florida, entered judgments of permanent injunction and other relief against Defendants Bimini Reef Real Estate, Inc., Christopher L. Astrom, Riverview Capital Inc. and Damian B. Guthrie (collectively, Defendants). The final judgments enjoin Defendants from violating Sections 5(a) and 5(c) of the Securities Act of 1933. In addition to injunctive relief, the judgments order the Defendants to pay disgorgement, prejudgment interest and civil penalties, in amounts to be determined at a later date. Astrom and Guthrie are also barred from participating in the offering of any penny stock. The Defendants consented to the entry of the judgments without admitting or denying any of the allegations in the complaint.
On September 20, 2010, the Commission filed its complaint against the Defendants and others alleging that they violated the registration provisions of the federal securities laws. [SEC v. BIH Corporation, et al., Civil Action No. 10-CV-577-FTM-29 DNF (M.D. Fla.)] (LR-21716)
Default Judgment of Permanent Injunction and Other Relief Entered Against Defendant Michael Muzio
The Commission announced that on October 25, 2010, the Honorable Kenneth L. Ryskamp, United States District Court Judge for the Southern District of Florida, entered a default judgment of permanent injunction and other relief against Defendant Michael Muzio. Muzio defaulted by failing to appear, answer or otherwise plead in response to the Commission's complaint. The default judgment permanently enjoins Muzio from future violations of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. In addition, Muzio is barred from participating in the offering of any penny stock.
On June 24, 2009, the Commission filed its complaint against Muzio alleging that he masterminded a fraudulent pump-and-dump scheme to manipulate the public trading market for International Business Ventures Group, Inc., a Palm Beach Gardens, Florida-based company. [SEC v. Michael Muzio, Civil Action No. 09-CV-80581-RYSKAMP (S.D. Fla.) (LR-21717)
Immediate Effectiveness of Proposed Rule Changes
The Depository Trust Company filed a proposed rule change (SR-DTC-2010-13), which became effective upon filing pursuant to Section 19(b)(3)(A) of the Exchange Act, that amends DTC rules to provide that DTC will impose a new disincentive fee for certain deposits made through its Deposit Automation Management (DAM) system. Publication is expected in the Federal Register during the week of November 1. (Rel. 34-63208)
A proposed rule change (SR-CBOE-2010-098) filed by the Chicago Board Options Exchange related to market maker tier appointment cost for SPX has become effective pursuant to Section 19(b)(3)(A) of the Securities Exchange Act of 1934. Publication is expected in the Federal Register during the week of November 1. (Rel. 34-63213)
A proposed rule change filed by the Fixed Income Clearing Corporation (SR-FICC-2010-07) to amend FICC's Government Securities Division's Fee Structure to add a monthly fee of $250 for GCF participants with the exception of the GCF inter-dealer brokers for the development and maintenance of the DTCC GCF Repo Index has become effective pursuant to Section 19(b)(3) (A) (ii) of the Securities Exchange Act of 1934. Publication is expected in the Federal Register during the week of November 1. (Rel. 34-63215)
Approval of Proposed Rule Change
The Commission granted approval of a proposed rule change (SR-CBOE-2010-080), as modified by Amendment No. 1, submitted by the Chicago Board Options Exchange pursuant to Rule 19b-4 under the Securities Exchange Act of 1934, to trade options on leveraged exchange-traded notes and to broaden the definition of "futures-linked securities." Publication is expected in the Federal Register during the week of November 1. (Rel. 34-63202)
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