"weekend summary- final! GMXX shares worth 4 cents each?"
By: nicotinepoison
16 Sep 2002, 12:00 AM EDT Msg. 894 of 17001
weekend summary- final! GMXX shares worth 4 cents each?
ragingbull.lycos.com
Vancouver brokerage Octagon Capital faces a $125,900 suit from Howe Street
player Garth Braun. (All figures are in U.S. dollars.) In a statement of
claim filed Wednesday in the Supreme Court of British Columbia, Mr. Braun
claims Octagon failed to deliver 29,500 shares of GeneMax, a tiny
biotechnology company listed on the OTC Bulletin Board and based in the
border town Blaine, Wash.
The allegations in the suit, filed by Vancouver lawyer Geoffrey Howard of
Gowling Lafleur Henderson, have not yet been proven in court and a
statement of defence has not yet been filed. (In other cases, Mr. Howard
has served as Vancouver counsel for the United States Securities and
Exchange Commission in its pursuit of alleged securities violators in
Canada.)
The Braun suit is the latest development in GeneMax's naked shorting saga.
By coincidence, this suit was launched the same day two other Vancouver
brokerages, Global Securities and Union Securities, filed parallel
statements of defence and counterclaims to a naked shorting suit GeneMax
launched against them a week ago, on Sept. 4.
Despite considerable volatility, GeneMax has done a commendable job keeping
its stock in the $5 range since it began trading July 15 at $6 after a
reverse takeover of Eduverse.com, one of the penny shells in the stable of
Brent Pierce and his long-time associate Grant Atkins.
In its own suit, GeneMax claims seeks unspecified general, punitive and
special damages against Global and Union, which it alleges were
participants in a market manipulation scheme involving naked shorting, in
which clients sell shares short without offsetting share borrowing to cover
the positions. In court filings, GeneMax offers a broad outline of the
purported scheme, without any details to support the serious allegations,
including the identities of other parties in the scheme, the duration, the
amount of shares and the value.
In their defences, filed Wednesday by lawyer Henning Weibach of Campney &
Murphy, Global and Union deny they have any obligation to ensure shorted
sales can be borrowed or delivered, as these obligations are only owed by
the short seller client to the purchaser in the trade. Both brokerages deny
doing any shorting themselves of GeneMax beyond minimal levels.
Union and Global also claim that short selling in a public market is both
lawful and legitimate. "Short sales in closely held and thinly traded
securities provide both market liquidity and pricing efficiency and
actually reduce the risk that the price paid by investors for thinly traded
shares will be artificially high because of a temporary contraction of, or
restriction affecting, supply," state the defences.
The two brokerages also claim that GeneMax's stock price has been
artificially high, as major shareholders have locked up 9.15 million shares
in a pooling agreement, leaving a paper-thin free-trading float of just
250,000 shares. "As a result of this artificial restriction of the supply
of the plaintiff's shares the plaintiff has, based on the prices paid for
the plaintiff's shares when the writ was filed (approximately $5US per
share), a market capitalization of approximately $45,000,000US against
total stockholder equity of approximately $400,000US or approximately
$0.04US per share," states lawyer Mr. Weibach in the defences.
Global and Union have also filed counterclaims against GeneMax, based on
its Sept. 5 press release accusing them of manipulative trading abuses.
"The press release disparaged the reputation and character of Union (and
Global) in the community and was intended by the plaintiff to do so. The
plaintiff knew and ought to have known that the plain meaning or innuendo
of the words was defamatory and libellous of Union (and Global) and that
the words, their meaning and their innuendo were untrue," state the
counterclaims. Both brokerages seeks unspecified general, aggravated,
exemplary and punitive damages.
Mr. Braun has now entered the fray with his own suit against Octagon. Mr.
Braun is no stranger to Howe Street. Between 1988 and 1990, he served as a
director and spokesman for Trasco Wind-Force Technologies, a wind turbine
promotion, during an unfortunate period. In mid-1998, Investors World of
Monaco, which had been promoting several Canadian stocks including Trasco
and Rich Coast Sulfur, suffered the misfortune of being shut down amid the
arrests of its publisher Maurice Schelvis, its manager Jan Pierre Ivaldi
and two women on allegations of fraud. At the time, Mr. Braun, told
Stockwatch that Trasco had not had any contact of any kind with Investors
World.
In recent years, Mr. Braun has been a private placement investor in
numerous Howe Street deals, including controversial Arakis/Delgratia
promoter Terry Alexander's Nortran Pharmaceuticals in 1995. Mr. Braun also
served as a director of DataWave Systems until July, 2001.
In his current suit, Mr. Braun claims he opened an account at Octagon
Capital on July 18. (By coincidence, GeneMax began trading three days
earlier, on July 15.) The suit claims that five days after opening his
account, Mr. Braun embarked on a small-scale GeneMax trading spree, in
which he made "net purchases" of 29,500 shares between July 23 and Aug. 2.
Fate soon intervened. "On or about July 30, 2002, GeneMax announced that it
was no longer participating in registration of ownership of its shares
through the Canadian Depository System and other depository systems and
encouraged all shareholders to become registered shareholders by requesting
their broker provide them with a physical share certificate," states lawyer
Mr. Howard in the suit.
Alas, poor Octagon was caught short, no pun intended. Starting on Aug. 5,
the settlement date for his final share purchase, Mr. Braun sought delivery
of a physical share certificate but Octagon has failed to, or been unable
to, comply. "The defendant has purported to explain such failure by short
trading in shares of GeneMax. Such short trading included short trading by
the defendant," states the suit.
Mr. Braun claims that as a result of Octagon's inability to deliver him his
share certificate, he has suffered damages, including "irreparable harm,"
as he is unable to resell his shares to avoid a loss or make a profit. The
suit seeks an order for specific performance, that is delivery of the share
certificate, or a refund of the $124,921.52 which Mr. Braun calculates he
paid for his net GeneMax purchases. |
