Wednesday September 5 1:32 PM ET
Regulators Sue Two Men Over Alleged Stock Fraud
WASHINGTON (Reuters) - U.S. securities regulators on Wednesday said they have filed suit against two men accused of fraud involving securities in Hollywood Productions Inc., now known as Shopnet.com Inc. (Nasdaq:SPNT - news)
Civil charges were filed Tuesday by the U.S. Securities and Exchange Commission (news - web sites) against Ilan Arbel, a 48-year-old Israeli citizen with a controlling stake in Hollywood, and David Melillo, 40, a resident of St. Petersburg, Florida.
They were accused of selling stock in Hollywood, a company that bought screenplays and produced low budget movies, to the public at ``artificially inflated prices'' through Euro-Atlantic Securities Inc., which bought the securities at a discount.
Part of the illicit profits were used to pay ``kickbacks'' to brokers at Euro, which was based in Boca Raton, Florida, for selling Hollywood securities to customers, the SEC alleged in the complaint.
The fraudulent sales practices also included using customer funds to buy Hollywood securities, according to the complaint, which was filed in U.S. federal court in Brooklyn.
Through his control of Euro, a now defunct broker-dealer, Melillo ran a ``boiler room'' to provide retail sales, created demand, and controlled the stock prices through what the SEC called ``fraudulent and deceptive sales practices,'' according to the complaint.
``As a result of their fraudulent scheme, Arbel and Melillo defrauded investors of approximately $8 million from the sales of Hollywood securities,'' said the SEC, an investor protection agency.
It was not immediately known if the defendants were represented by attorneys.
In May 1999 Hollywood changed its name to Shopnet.com, whose stock was down 9 cents at 92 cents on Nasdaq in early-afternoon trading. The price ranged from 13 cents to $3.13 over the past year.
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