U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 23400 / November 4, 2015
Securities and Exchange Commission v. Abraxas J. Discala, Marc E. Wexler, Matthew A. Bell, Craig L. Josephberg, and Ira Shapiro, Civil Action No. 14-CV-4346-ENV (United States District Court for the Eastern District of New York, Complaint filed July 17, 2014)
The Securities and Exchange Commission today announced it has identified three additional individuals to charge in a penny stock manipulation case the agency filed last year against alleged corrupt brokers and others.
The SEC filed a request in federal court in Brooklyn to lift the stay in its civil action for the purposes of filing an amended complaint alleging that two additional brokers, Michael Morris and Ronald Heineman, facilitated the scheme through their brokerage firm while a third man, attorney Darren Ofsink, profited illegally by selling unregistered shares for which no registration exemption applied.
In a parallel action, the U.S. Attorney’s Office for the Eastern District of New York today announced criminal charges against Morris and Ofsink.
According to the SEC’s amended complaint:
The SEC’s amended complaint charges Morris with violations of Sections 5(a), 5(c), 17(a)(1), and 17(a)(3) of the Securities Act of 1933 (“Securities Act”) and Sections 9(a)(1), 9(a)(2), and 10(b) of the Securities Exchange Act of 1934 (“Exchange Act”) and Rules 10b-5(a) and (c) thereunder. Heineman is charged with violations of Sections 17(a)(1) and 17(a)(3) of the Securities Act and Sections 9(a)(1), 9(a)(2), and 10(b) of the Exchange Act, and Rules 10b-5(a) and (c) thereunder. Ofsink is charged with violations of Sections 5(a) and 5(c) of the Securities Act. The amended complaint seeks a final judgment ordering them to disgorge ill-gotten gains plus prejudgment interest, imposing financial penalties, and permanently enjoining them from future violations of the federal securities laws.
The SEC also suspended trading in CodeSmart stock today because the company has not filed any periodic reports since last year and suspicious market activity has taken place. The SEC has instituted public administrative proceedings against CodeSmart to determine whether it should suspend or revoke the registration of its securities.
The SEC’s continuing investigation is being conducted by Charles D. Riely of the Market Abuse Unit in New York and Sheldon L. Pollock, Diego D. Brucculeri, and Jordan W. Baker of the New York Regional Office. The litigation will be led by Michael D. Birnbaum. The SEC appreciates the assistance of the U.S. Attorney’s Office for the Eastern District of New York, the Federal Bureau of Investigation, and the Financial Industry Regulatory Authority.
For further information, see Litigation Release No. 23046 (July 17, 2014) (announcing charges by the SEC against Abraxas J. Discala, Marc E. Wexler, Matthew A. Bell, Craig L. Josephberg, and Ira Shapiro).