U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 23346 / September 14, 2015
Securities and Exchange Commission v. Marco Babini et al., Civil Action No. 1:15-cv-13348 (D. Mass. Sept. 14, 2015)
SEC Charges Medical Diagnostics Company Chairman and Two Others Behind Scheme to Manipulate Company Stock
The Securities and Exchange Commission has charged the executive chairman of a Massachusetts-based medical diagnostics company and two others with conducting a pump-and-dump scheme that was ultimately thwarted when the SEC suspended trading in the company's securities before the secretly controlled shares could be dumped on unsuspecting investors.
The SEC alleges that Edward Withrow III became chairman of the new board of directors at Endeavor Power Corp. in late 2012 after a penny stock company he controlled merged with another controlled by Marco Babini, a Canadian citizen. Withrow and Babini schemed with Samuel Brown, a stock promoter in Idaho, to use Endeavor Power as a vehicle for shaping and carrying out their pump-and-dump scheme.
In a parallel action, the U.S. Attorney's Office for the District of Massachusetts announced criminal charges against Withrow and Babini. Brown previously pled guilty to charges that included making false statements to the SEC during its investigation.
According to the SEC's complaint filed in federal court in Boston:
The SEC's complaint charges Withrow, Babini, and Brown with violating (and, in the case of Withrow and Brown, aiding and abetting violations of) the antifraud provisions of the federal securities laws in Section 10(b) of the Securities Exchange Act of 1934 (Exchange Act) and Rule 10b-5(a) and (c) thereunder, and Section 17(a)(1) and (3) of the Securities Act of 1933. Withrow also is charged with violating Sections 13(d) and 16(a) of the Exchange Act and Rules 13d-1(a) and 16a-3 thereunder, and Babini is charged with violating Section 9(a)(2) of the Exchange Act. The SEC seeks a final judgment ordering Withrow, Babini, and Brown to pay disgorgement of ill-gotten gains plus prejudgment interest and penalties. The SEC also is seeking permanent injunctive relief, penny stock bars against all three defendants, and an officer-and-director bar against Withrow.
The SEC's investigation was conducted by Andrew J. Palid and Mark Albers of the Boston Regional Office and supervised by Michele T. Perillo. The SEC's litigation will be led by Martin F. Healey. SEC attorney Eric A. Forni has been appointed a Special Assistant U.S. Attorney in the parallel criminal case. The SEC appreciates the assistance of the U.S. Attorney's Office for the District of Massachusetts, Federal Bureau of Investigation, and Financial Industry Regulatory Authority.