Securities Regulation Daily Wrap Up, FRAUD AND MANIPULATION—E.D.N.Y.: Microcap CEO will pay almost $300,000 for false press releases, (Oct 18, 2022)
Organizations Mentioned:In Ovations Holdings, Inc.
The company and CEO were charged with issuing false press releases as part of a scheme to gin up enthusiasm in the market for the benefit of promoters.
The SEC won a final judgment against the former CEO of a penny stock company who issued false press releases. According to the complaint, between 2014 and early 2015, the CEO caused the company to issue a series of press releases making various false claims about successes such as licensing agreements and acquisitions. All of these releases were false and had been intended to lure in investors so that stock promoters could in turn sell their company shares at a profit. The CEO agreed to an injunction, penny stock and officer-director bars and to pay disgorgement and interest; the disgorgement and interest were satisfied by payments made in a related criminal case (SEC v. In Ovations Holdings, Inc., October 6, 2022, Brodie, M.).
In Ovations Holdings, Inc., has claimed to be in a variety of industries. Initially in the business of searching for marine salvage, Ovations claimed to make products supporting the cannabis industry in 2017 and has since claimed to sell water filtration systems. During the time at issue, Ovations' common stock met the definition of a "penny stock." Mark Goldberg served as Ovations' CEO between 2009 and mid-2015.
According to the complaint, from at least 2014 through 2015, Ovations and Goldberg issued materially false press releases to fraudulently induce investors to buy Ovations stock. The Commission charged Goldberg with generating the press releases in order to fraudulently induce investors to buy shares of Ovations stock so that one or more stock promoters could sell their Ovations shares for a profit. On information and belief, Goldberg received approximately $250,000 in return from one or more of these stock promoters.
Among several examples in the complaint, in 2014, Ovations issued a press release claiming that it had obtained exclusive rights to market a lung cancer detection technology. The release also claimed that the patent holder of the technology was an Ovations director. According to the complaint, however, Goldberg knew this release was false because Ovations never provided any funding to the individual under its licensing agreement and that individual never served as an officer or director of Ovations. The day after the press release was issued, approximately 9.95 million Ovations shares traded in the market; on the preceding days, no shares had traded.
The complaint charged Ovations and Goldberg with violating the antifraud provisions of the Exchange Act. The SEC sought permanent injunctive relief and civil monetary penalties against Ovations and Goldberg, and also disgorgement of ill-gotten gains plus prejudgment interest, an officer and director bar, and a penny stock bar against Goldberg. The Commission's case against Ovations remains pending.
Judgment. The final consent judgment against Goldberg enjoined him from violating the antifraud provisions. Goldberg was also barred from serving as an officer or director and from participating in penny stock offerings. He was also ordered to pay disgorgement of $250,000, plus pre-judgment interest of $44,889.86, but the obligation to pay this amount was deemed satisfied by entry of the restitution order and forfeiture order against Goldberg in the related criminal case, U.S. v. Goldberg.
The case is No. 1:18-cv-05026.
Attorneys: Preethi Krishnamurthy for the SEC.
Companies: In Ovations Holdings, Inc.
LitigationEnforcement: FraudManipulation GCNNews NewYorkNews