U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 23135 / November 19, 2014
Securities and Exchange Commission v. Forum National Investments Ltd., et al., Civil Action No. 5:14-cv-02376 (C.D. Cal., filed November 18, 2014)
SEC Charges Canadian Life Settlement Company in Pump-And-Dump Scheme
On November 18, 2014, the Securities and Exchange Commission ("Commission") charged a Canadian life settlement company, its CEO, and three other individuals for engaging in a pump-and-dump scheme that misled investors and artificially inflated the price of the company's stock. According to the Commission's complaint, filed in the United States District Court for the Central District of California, Daniel Clozza, the CEO of Forum National Investments Ltd., and one of his associates, Robert Logan Dunn, hired two penny stock promoters, William Anguka and Alex Ghaznawi, to create and publish promotional materials about Forum during the summer of 2012. These materials, which Anguka and Ghaznawi posted on the internet under fake and assumed names, made false and misleading statements about Forum, fabricated quotes and "buy" recommendations from stock analysts who did not cover the company, and claimed that a fictitious entity named "Welsson Financial Media" funded the promotion. At the same time, the complaint alleges, Clozza caused Forum to issue press releases that made false and misleading statements about the company, including the launch and success of a non-existent bond offering. The defendants' scheme caused significant increases in the trading volume and price of Forum stock - from $0.36 per share on a volume of 15,000 shares to $1.90 on a volume of 254,000 shares - from which Clozza's relatives and associates, including Dunn, profited by selling more than one million shares in the public markets.
The Commission's complaint alleges that Forum, Clozza, Dunn, Anguka, and Ghaznawi violated Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, that Anguka and Ghaznawi violated Section 17(b) of the Securities Act of 1933 and that Dunn aided and abetted those violations, and that Forum violated Section 13(a) of the Securities Act and Rule 13a-1 thereunder. The complaint seeks permanent injunctions and financial penalties against each defendant, disgorgement with prejudgment interest and penny stock bars against the individual defendants, and an officer-and-director bar against Clozza.
Also on November 18, the Commission also instituted public administrative proceedings against Forum pursuant to Section 12(j) of the Exchange Act in order to determine whether to suspend or revoke the registration of the company's securities as a result of its failure to comply with the reporting provisions of the Exchange Act.