"On June 25, 2009, the Company entered into an asset purchase agreement to purchase and assume certain assets of John Bordynuik, Inc., a Delaware corporation. This is an arms-length agreement between the Company and John Bordynuik Inc by President and CEO John Bordynuik, who is the majority shareholder in both the Company and John Bordynuik Inc."
310 Holdings/Inc • 8-K • For 6/25/09
secinfo.com
How does one have an "arms-length" agreement with himself?
Washington, D.C., Feb. 18, 2011 — The Securities and Exchange Commission today charged a group of seven individuals who perpetrated a fraudulent pump-and-dump scheme in the stock of a sham company that purported to provide products and services to fight global warming
III. KROME WROTE A FRAUDULENT OPINION LETTER ENABLING C02 TECH STOCK TO BE FREELY TRADED.
30. On January 16,2007, Krome wrote a legal opinion letter pertaining to the issuance of the 22.5 million shares of C02 Tech stock to MMTC & Co. In the opinion letter, Krome recited: "JB Investment Enterprises Ltd. entered into with C02 Tech Ltd., a Nevada corporation, a Convertibie Debenture Note dated October 1, 2006, in the amount of TWO HUNDRED THOUSAND ($200,000)(the 'Principle'), plus interest at the rate of TEN PERCENT (10%) per annum, payable in three months, on January 1,2007."
31. Krome further represented that JB Investment was notified that C02 Tech had defaulted on the debenture; and the principal and interest on the debenture were partially converted to 22.5 million shares ofC02 Tech stock. Krome cited Section 4(1) ofthe Securities Act, Securities Act Rule 144 and Model UCC Article 9 for the proposition that a non-affiliated shareholder who obtained securities pursuant to a good faith commercial transaction for value, as a result of an issuer defaulting on a loan, can legally sell the securities without registration. In particular, according to Krome: "Pledgee has represented that it is a bona fide Pledgee of the stock and is foreclosing under Article 9 of the Uniform Commercial Code, and is therefore permitted to sell under Article 9 without registration pursuant to Section 4(1) of the Securities Act of 1933." Krome concluded that CO Tech could issue the 22.5 million shares without a restrictive legend and transfer them to MMTC & Co.
32. Krome's opinion letter, and the debenture on which the letter was based, were fraudulent. Because C02 Tech had no assets or operating revenue to repay the debenture, it was simply a pretext for the issuance of stock to JB Investment or its assignee. Krome knew or was reckless in not knowing that neither C02 Tech (the Nevada company and C02 Tech U.K.) nor JB Investment were in existence on October 1, 2006, the date that they purportedly entered into the debenture. China Energy did not become C02 Tech until January 2, 2007, when Krome filed an amendment to its articles of incorporation changing its name. C02 Tech U.K. was not incorporated until January 24, 2007. Krome incorporated JB Investment in Delaware on January 4, 2007 -- three months after it supposedly signed the debenture.
33. Schotten could not have signed the debenture as Chairman of C02 Tech on October 1,2006 because she did not become an officer or director until January 9,2007. Krome had possession of the January 9 corporate resolution making Schotten sole director and executive officer. The short-term debt purportedly created by the debenture was not recorded on C02 Tech's December 31,2006 balance sheet, which Krome posted on the Pink Sheets.
34. Krome knew that C02 Tech and JB Investment were affiliated with each other - i.e., that Weinbaum and Zigdon beneficially owned and effectively controlled both companies. Krome performed similar legal work for Weinbaum and acted as escrow agent for the proceeds of other suspected pump-and-dump schemes that Weinbaum perpetrated. At the time of the C02 Tech manipulation, Krome spoke with Weinbaum and sent packages to Weinbaum and Zigdon on several occasions. Zigdon was included on correspondence between Krome and C02 Tech's transfer agent.
35. The legal theory of Krome's opinion letter was invalid. It was based on the false premise that C02 Tech and JB Investment entered into the convertible debenture at arms' length and in good faith. In reality, the debenture did not represent an arms' length transaction because both C02 Tech and JB Investment were beneficially owned and controlled by Weinbaum and Zigdon. Weinbaum and Zigdon did not intend in good faith to have C02 Tech use the purported financing from JB Investment for capital expenditures. Instead, they intended to use the financing to buy a shell corporation and not repay the debt, so that they could obtain C02 Tech stock without a restrictive legend and sell it to the public.
36. Rule 144 requires that certain thresholds be met to ensure that a shareholder selling unregistered securities is not an issuer, underwriter or dealer. One of the thresholds applicable in 2007 was a holding period of at least one year. Here, the selling in C02 Tech stock began within days after it was issued. When questioned in investigative testimony about the bases for his opinion letter, Krome refused to answer and invoked his Fifth Amendment privilege against self incrimination.
37. In reliance on Krome's opinion letter, on January 16,2007 C02 Tech's transfer agent issued the 22.5 million shares of stock to MMTC & Co. The stock certificate representing the 22.5 million shares was deposited into an account at Mission Management on or about January 17,2007. Sentry Global represented to AIDT that the total value of the shares was $33.7 million. With the 22.5 million shares, Red Sea controlled nearly the entire public "float" of C02 Tech stock.
38. On January 12,2007, Schotten purportedly authorized the issuance of 500 million restricted shares to herself as compensation for serving as an officer and director of C02 Tech. According to stock transfer records, the certificate for the 500 million restricted shares was issued to "Helga Shcoten" but was never sent to Schotten.
SECURITIES AND EXCHANGE COMMISSION,
Plaintiff,
v.
JONATHANR. CURSHEN,
MICHAEL S. KROME,
DAVID C. RICCI,
RONNY MORALES SALAZAR,
ROBERT L. WEIDENBAUM,
ARIAV "ERIC" WEINBAUM, and
YITZCHAK ZIGDON a/k/a IZHACK ZIGDON,
Defendants.
SEC Complaint
sec.gov
Washington, D.C., Feb. 18, 2011 — The Securities and Exchange Commission today charged a group of seven individuals who perpetrated a fraudulent pump-and-dump scheme in the stock of a sham company that purported to provide products and services to fight global warming.
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