Re: 4/11/03 - [BLPT/Goelo] US District Court: SEC vs. Sierra Brokerage et. al (2 of 2)
The Slide Down
66. BluePoint never regained the $21 per share high and million-plus volume seen on its first day of trading. On the first day, it closed at $17.75 per share. On the second day, BluePoint closed at $18.50 per share, and trading volume fell to slightly over 100,000 shares. By March 13, 2000, BluePoint closed at $17.875 per share on volume of 80,000 shares. By March 20, 2000, the closing price was $14.50 per share on a volume of 34,000, and by March 27, 2000, BluePoint closed at $13.75 per share with volume of 25,000. On April 6, 2000, one month after it began trading, BluePoint closed at $6.875 per share with volume of 6,700.
67. On the last trading day in April, BluePoint closed at $6.375 per share with 3,700 in volume. By the end of May, it was down to slightly over $4.00 per share, and by the end of June, it fell to under $3.00 per share, with volume at 3,800.
68. After July 2000, BluePoint never closed above $5 again.
Touting Scheme
69. Markow and Goelo orchestrated a scheme to arrange for individuals, including Armstrong, to tout the BluePoint stock. Armstrong posted over eighty times on the BluePoint message board located on the Raging Bull website in the first three weeks. He praised BluePoint's investment value and encouraged traders who were having trouble getting their orders filled to keep trying. Armstrong never stated in his posts on the Internet that he was being compensated for making the postings. However, Goelo and Markow compensated Armstrong by transferring stock in three separate companies to Armstrong at below market prices during the relevant time period.
Profits to the Defendants
70. All the defendants profited from selling BluePoint. After the first day of trading and continuing through July, the Promoter Defendants sold off many of their remaining shares. Although the price of BluePoint fell sharply during this period, the Promoter Defendants continued to profit because they had paid Tsai only pennies per share for their stock.
71. Tsai received $250,000 from the Promoter Defendants when they bought the nominee shares from him.
72. To date, the Promoter Defendants' approximate profits from selling BluePoint are as follows: Yang $1.27 million; Luo $1.24 million; Markow $1.23 million; and Goelo $300,000.
73. Sierra's profits from BluePoint were about $570,000 on March 6, 2000 and about $40,000 thereafter. Sierra paid 60% of its March 6 BluePoint profits to Geiger, per his usual compensation program. Richardson has made about $90,000 in profits from trading BluePoint in his personal account, most of which he made on March 6.
74. Armstrong made at least $20,000 from selling the shares of the three securities he received from Markow and Goelo.
75. In making their profits, the Promoter Defendants did not give up their control of the float. By the end of the third week of trading (March 27, 2000), they still directly held about 2.97 million shares. On succeeding dates, they still held shares as follows: April 17, 2.96 million shares; April 30, 2.94 million shares; May 31, 2.63 million shares; June 30, 2.82 million shares; July 31, 2.78 million shares.
76. During this time, the Promoter Defendants never reported made any filings with the Commission as required to report their sales of BluePoint stock and the change in their ownership of the securities.
COUNT I
Violations of Sections 5(a) and 5(c) of the Securities Act
[15 U.S.C. §77e(a) and §77e(c)]
77. Paragraphs 1 through 76 are hereby realleged and incorporated by reference.
78. From February 2000 through at least July 2000, Defendants Tsai, Markow, Global Guarantee, Goelo, Yang, K&J, Luo, M&M, Sierra and Richardson, and each of them, directly or indirectly, made use of the means or instruments of transportation or communication in interstate commerce or of the mails to offer and sell securities through the use or medium of a prospectus or otherwise when no registration statement has been filed or was in effect as to such securities and when no exemption from registration was available.
79. Tsai orchestrated a complex scheme to create the appearance that he had distributed MAS shares to dozens of shareholders who in fact were nominees. Tsai then sold this nominee stock to the Promoter Defendants. Yang and Luo resold 220,000 shares to Sierra, which immediately resold shares. Thereafter, all the promoters continued to sell shares they had acquired from Tsai, and Richardson sold the BluePoint shares he obtained from Sierra. Overall, Tsai, the promoters, Sierra and Richardson funneled BluePoint stock into the public trading market without a registration statement in effect.
80. By reason of the activities described in paragraphs 77 through 79 above, Defendants Tsai, Markow, Global Guarantee, Goelo, Yang, K&J, Luo, M&M, Sierra and Richardson, and each of them, violated Sections 5(a) and 5(c) of the Securities Act [15 U.S.C. §77e(a) and §77e(c)].
COUNT II
Violations of Section 17(a)(1) of the Securities Act [15 U.S.C. §77q(a)(1)]
81. Paragraphs 1 through 76 are realleged and incorporated by reference herein.
82. At the times alleged in this Complaint, Defendants Markow, Global Guarantee, Goelo, Yang, K&J, Luo, M&M, Sierra, Geiger, and Richardson, and each of them, in the offer and sale of securities, by the use of the means and instruments of transportation and communication in interstate commerce and by the use of the mails, directly and indirectly, employed devices, schemes and artifices to defraud, all as more fully described in paragraphs 1 through 76 above.
83. Defendants Markow, Global Guarantee, Goelo, Yang, K&J, Luo, M&M, Sierra, Geiger, and Richardson, and each of them, knew or were reckless in not knowing of the facts and circumstances described in paragraphs 1 and 76 above.
84. By reason of the activities described in paragraphs 81 through 83 above, Defendants Markow, Global Guarantee, Goelo, Yang, K&J, Luo, M&M, Sierra, Geiger, and Richardson, and each of them, violated Section 17(a)(1) of the Securities Act [15 U.S.C. §77q(a)(1)].
85. Alternatively, by reason of the activities described in paragraphs 81 through 83 above, Defendant Markow and Global Guarantee knew, or was reckless in not knowing, of the activities committed by Defendants Goelo, Yang, K&J, Luo, M&M, Sierra, Geiger, and Richardson, violated Section 17(a)(1) of the Securities Act [15 U.S.C. §78q(a)(1)], and provided substantial assistance in their violation. Thus, Defendants Markow and Global Guarantee aided and abetted Defendants Goelo, Yang, K&J, Luo, M&M, Sierra, Geiger, and Richardson's violation of Section 17(a)(1) of the Securities Act [15 U.S.C. §78q(a)(1)].
COUNT III
Violations of Section 17(a)(2) and 17(a)(3) of the Securities Act
[15 U.S.C. §§77q(a)(2) and 77q(a)(3)]
86. Paragraphs 1 through 76 are realleged and incorporated by reference herein.
87. At the times alleged in this Complaint, Defendants Markow, Global Guarantee, Goelo, Yang, K&J, Luo, M&M, Sierra, Geiger, and Richardson, and each of them, in the offer and sale of securities described above in paragraphs 1 through 76, by the use of the means or instruments of transportation and communication in interstate commerce and by the use of the mails, directly and indirectly, obtained money and property by means of untrue statements of material facts and have omitted and are omitting to state material facts necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading; and engaged in transactions, practices or courses of business which operated and operated as a fraud and deceit upon purchasers and prospective purchasers as more fully described in paragraphs 1 through 76 above.
88. By reason of the activities described in paragraphs 86 and 87 above, Defendants Markow, Global Guarantee, Goelo, Yang, K&J, Luo, M&M, Sierra, Geiger, and Richardson, and each of them, violated Section 17(a)(2) and 17(a)(3) of the Securities Act [15 U.S.C. §77q(a)(2) and §77q(a)(3)].
89. Alternatively, by reason of the activities described in paragraphs 86 through 87 above, Defendants Markow and Global Guarantee knew, or was reckless in not knowing, of the activities committed by Defendants Goelo, Yang, K&J, Luo, M&M, Sierra, Geiger, and Richardson, violated Section 17(a)(2) and 17(a)(3) of the Securities Act [15 U.S.C. §77q(a)(2) and §77q(a)(3)], and provided substantial assistance in their violation. Thus, Defendants Markow and Global Guarantee aided and abetted Defendants Goelo, Yang, K&J, Luo, M&M, Sierra, Geiger, and Richardson's violation of Section 17(a)(2) and 17(a)(3) of the Securities Act [15 U.S.C. §78q(a)(2) and §78q(a)(3)].
COUNT IV
Violations of Section 10(b) of the Exchange Act [15 U.S.C. §78j(b)]
and Rule 10b-5 [17 C.F.R. §240.10b-5] Thereunder
90. Paragraphs 1 through 76 are realleged and incorporated by reference as if set forth fully herein.
91. At the times alleged in the Complaint, Defendants Markow and Global Guarantee, in connection with the purchase and sale of securities described above in paragraphs 1 through 76, by the use of the means and instrumentalities of interstate commerce and of the mails, directly and indirectly, employed devices, schemes and artifices to defraud; made statements of material fact and omitted to state material facts necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading; and engaged in acts, practices and courses of business which operated as a fraud and deceit upon purchasers and sellers of such securities as more fully described in paragraphs 1 through 76 above; or in the alternative, by reason of the activities described in paragraphs 1 through 76 above, Defendants Markow and Global Guarantee knew, or was reckless in not knowing, of the activities committed by Defendants Goelo, Yang, Luo, Sierra, Geiger, and Richardson, violated Section 10(b) of the Exchange Act [15 U.S.C. §78j(b)] and Rule 10b-5 [17 C.F.R. §240.10b-5] promulgated thereunder, and provided substantial assistance in their violation. Thus, Defendants Markow and Global Guarantee aided and abetted Defendants Goelo, Yang, Luo, Sierra, Geiger, and Richardson's violation of Section 10(b) of the Exchange Act [15 U.S.C. §78j(b)] and Rule 10b-5 [17 C.F.R. §240.10b-5] promulgated thereunder.
92. At the times alleged in the Complaint, Defendants Goelo, Yang, K&J, Luo, M&M, Sierra, Geiger, and Richardson, and each of them, in connection with the purchase and sale of securities described above in paragraphs 1 through 76, by the use of the means and instrumentalities of interstate commerce and of the mails, directly and indirectly, employed devices, schemes and artifices to defraud; made statements of material fact and omitted to state material facts necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading; and engaged in acts, practices and courses of business which operated as a fraud and deceit upon purchasers and sellers of such securities as more fully described in paragraphs 1 through 76 above.
93. Defendants Markow, Global Guarantee, Goelo, Yang, K&J, Luo, M&M, Sierra, Geiger, and Richardson, and each of them, knew or were reckless in not knowing of the activities described in paragraphs 1 and 76 above.
94. By reason of the activities described in paragraphs 90 through 93 above, Defendants Markow, Global Guarantee, Goelo, Yang, K&J, Luo, M&M, Sierra, Geiger, and Richardson, and each of them, violated Section 10(b) of the Exchange Act [15 U.S.C. §78j(b)] and Rule 10b-5 [17 C.F.R. §240.10b-5] promulgated thereunder.
COUNT V
Violations of Section 15(c)(1) of the Exchange Act [15 U.S.C. §78o(c)(1)]
95. Paragraphs 1 through 76 are realleged and incorporated by reference herein.
96. At all times alleged in the Complaint, Defendants Sierra, as a registered broker-dealer, made use of the mails and instrumentalities of interstate commerce, and induced the purchase and sale of securities, otherwise than on a national securities exchange of which they were members, by means of manipulative, deceptive and fraudulent devices and contrivances, as more fully described in paragraphs 1 through 76 above.
97. Defendant Sierra knew, or was reckless in not knowing, of the activities described in paragraphs 1 and 76 above.
98. By reason of the activities described in paragraphs 95 through 97 above, Defendant Sierra violated Section 15(c)(1) of the Exchange Act [15 U.S.C. §78o(c)(1)] and Rule 15c1-2 [17 C.F.R. §240.15c1-2].
COUNT VI
Aiding and Abetting Violations of Section 15(c)(1) of the Exchange Act
[15 U.S.C. §78o(c)(1)]
99. Paragraphs 1 through 76 are realleged and incorporated by reference herein.
100. At all times alleged in the Complaint, Defendant Sierra, as a registered broker-dealer, made use of the mails and instrumentalities of interstate commerce, and induced the purchase and sale of securities, otherwise than on a national securities exchange of which they were members, by means of manipulative, deceptive and fraudulent devices and contrivances, as more fully described in paragraphs 1 through 76 above.
101. Defendants Geiger and Richardson knew, or were reckless in not knowing, of the activities committed by Defendant Sierra as described in paragraphs 1 and 76 above, violated Section 15(c)(1) of the Exchange Act [15 U.S.C. §78o(c)(1)], and provided substantial assistance in Defendant Sierra's violation.
102. By reason of the activities described in paragraphs 99 through 101 above, Defendants Geiger and Richardson aided and abetted Defendant Sierra's violation of Section 15(c)(1) of the Exchange Act [15 U.S.C. §78o(c)(1)].
COUNT VII
Violations of Section 17(b) of the Securities Act [15 U.S.C. §77q(b)]
103. Paragraphs 1 through 76 are realleged and incorporated by reference herein.
104. At all times alleged in the Complaint, Defendant Armstrong, by engaging in the conduct described above with respect to BluePoint, used the means or instruments of interstate transportation, or communication in interstate commerce, or the mails, to publish or circulate communications which described securities for a consideration received or to be received, directly or indirectly from the issuers, without fully disclosing the receipt, whether past or prospective, of such consideration and the amount thereof, as more fully described in paragraph 66 above.
105. By reason of the activities described in paragraphs 103 through 104 above, Defendant Armstrong violated Section 17(b) of the Securities Act [15 U.S.C. § 77q(b)].
COUNT VIII
Violations of Section 13(d) (1) and (2) of the Exchange Act
[15 U.S.C. §§78m(d)(1) and (2)] and Rule 13d-1(a) and 13d-2(a)
thereunder [17 C.F.R. §§240.13d-1(a) and 240.13d-2(a)]
106. Paragraphs 1 through 76 are realleged and incorporated by reference herein.
107. The common stock of BluePoint was registered pursuant to Section 12 of the Exchange Act [15 U.S.C. §78l] and was listed and traded on the OTC Bulletin Board, as more fully described in paragraphs 31 and 32 above.
108. At all times alleged in the Complaint, Defendant Tsai, directly or indirectly through nominees, beneficially owned substantially more than 5% of the issued and outstanding shares of MAS. Defendant Tsai, however, never filed any Schedule 13D with the Commission which disclosed his beneficial ownership of MAS stock.
109. At all times alleged in the Complaint, Defendants Markow, Global Guarantee, Goelo, Yang, K&J, Luo, and M&M acted as a "group for the purpose of acquiring, holding, or disposing of securities" and thus, are deemed a "person" as defined by Section 13(d)(3) of the Exchange Act [15 U.S.C. §78m(d)(3)].
110. Defendants Markow, Global Guarantee, Goelo, Yang, K&J, Luo, and M&M acting as a group, directly or indirectly, beneficially owned substantially more than 5% of the issued and outstanding shares of BluePoint. During all relevant times, Defendants Markow, Global Guarantee, Goelo, Yang, and Luo, directly or through entities they controlled, sold, for their own benefit, no less than 611,400 of these shares. Defendants Markow, Global Guarantee, Goelo, Yang, K&J, Luo, and M&M, however, never filed any Schedule 13D with the Commission disclosing their beneficial ownership and changes in beneficial ownership of BluePoint stock.
111. At all times alleged in the Complaint, Defendants Markow, Global Guarantee, Goelo, Yang, K&J, Luo, and M&M, never filed any Schedule 13D with the Commission disclosing their purpose for acquiring shares in BluePoint and any contracts, arrangements, or understandings they had amongst themselves with respect to BluePoint, including but not limited to, guaranties against loss or guaranties of profits. During this same time period, Defendants Markow, Global Guarantee, Goelo, Yang, K&J, Luo, and M&M, never filed any Schedule 13D with the Commission disclosing the source and amount of the funds or other consideration used or to be used in making the purchases in shares of BluePoint. Furthermore, Markow never reported the "desist-and-refrain" orders issued against him by the state of California as required by Schedule 13D.
112. By reason of the activities described in paragraphs 106 through 111 above, Defendants Tsai, Markow, Global Guarantee, Goelo, Yang, K&J, Luo, and M&M violated Section 13(d)(1) of the Exchange Act [15 U.S.C. §78m(d)(1)] and Rule 13d-1(a) thereunder [17 C.F.R. §§240.13d-1(a)].
113. By reason of the activities described in paragraphs 106 through 111 above, Defendants Markow, Global Guarantee, Goelo, Yang, K&J, Luo, and M&M violated Section 13(d)(2) of the Exchange Act [15 U.S.C. §78m(d)(2)] and Rule 13d-2(a) thereunder [17 C.F.R. §§240.13d-2(a)].
COUNT IX
Violations of Section 16(a) of the Exchange Act [15 U.S.C. §78p(a)]
and Rule 16a-3 thereunder [17 C.F.R. §§ 240.16a-3]
114. Paragraphs 1 through 76 are realleged and incorporated by reference herein.
115. The common stock of BluePoint was registered pursuant to Section 12 of the Exchange Act [15 U.S.C. §78l] and was listed and traded on the OTC Bulletin Board, as more fully described in paragraphs 31 and 32 above.
116. At all times alleged in the Complaint, Defendants Markow, Global Guarantee, Goelo, Yang, K&J, Luo, and M&M, are deemed a "person" as defined by Rule 16a-1(a)(1) of the Exchange Act [17 C.F.R. §240.16a-1(a)(1)].
117. At all times alleged in the Complaint, Defendants Markow, Global Guarantee, Goelo, Yang, K&J, Luo, and M&M, acting as a group, and Tsai beneficially owned substantially more than 10% of the issued and outstanding shares of BluePoint. Defendants Markow, Global Guarantee, Goelo, Yang, K&J, Luo, and M&M, however, never filed any Forms 3 or 5 with the Commission disclosing their beneficial ownership of BluePoint stock.
118. Defendants Markow, Goelo, Yang, and Luo, directly or through entities they controlled, sold, for their own benefit, no less than 611,400 of their BluePoint shares. Defendants Markow, Global Guarantee, Goelo, Yang, K&J, Luo, and M&M, never filed any Forms 4 notifying the Commission of changes in their BluePoint holdings.
119. By reason of the activities described in paragraphs 114 through 118 above, Defendants Tsai, Markow, Global Guarantee, Goelo, Yang, K&J, Luo, and M&M violated Section 16(a) of the Exchange Act [15 U.S.C. §78p(a)] and Rule 16a-3 thereunder [17 C.F.R. §§240.16a-3].
PRAYER FOR RELIEF
WHEREFORE, the Commission requests that the Court:
I.
Find that Defendants committed the violations alleged above.
II.
Grant an Order of Permanent Injunction, in a form consistent with Rule 65(d) of the Federal Rules of Civil Procedure, restraining and enjoining Defendants Tsai, Markow, Global Guarantee, Goelo, Yang, K&J, Luo, M&M, Sierra, and Richardson, their officers, agents, servants, employees, attorneys and those persons in active concert or participation with them who receive actual notice of the Order of Permanent Injunction, by personal service or otherwise, and each of them, from, directly or indirectly, engaging in the acts, practices or courses of business described above, or in conduct of similar purport and object, in violation of Sections 5(a) and 5(c) of the Securities Act [15 U.S.C. §77e(a) and 77e(c)].
III.
Grant an Order of Permanent Injunction, in a form consistent with Rule 65(d) of the Federal Rules of Civil Procedure, restraining and enjoining Defendants Markow, Global Guarantee, Goelo, Yang, K&J, Luo, M&M, Sierra, Geiger, and Richardson, their officers, agents, servants, employees, attorneys and those persons in active concert or participation with them who receive actual notice of the Order of Permanent Injunction, by personal service or otherwise, and each of them, from, directly or indirectly, engaging in the acts, practices or courses of business described above, or in conduct of similar purport and object, in violation of Sections 17(a)(1), 17(a)(2) and 17(a)(3) of the Securities Act [15 U.S.C. §§77q(a)(1), 77q(a)(2) and 77q(a)(3)] and Section 10(b) of the Exchange Act [15 U.S.C. §78j(b)] and Rule 10b-5 [17 C.F.R. §240.10b-5] thereunder.
IV.
Grant an Order of Permanent Injunction, in a form consistent with Rule 65(d) of the Federal Rules of Civil Procedure, restraining and enjoining Sierra, Richardson and Geiger, their agents, servants, employees, attorneys and those persons in active concert or participation with them who receive actual notice of the Order of Permanent Injunction, by personal service or otherwise, and each of them, from, directly or indirectly, engaging in the acts, practices or courses of business described above, or in conduct of similar purport and object, in violation of Sections 15(c)(1) of the Exchange Act [15 U.S.C. §78o(c)(1)].
V.
Grant an Order of Permanent Injunction, in a form consistent with Rule 65(d) of the Federal Rules of Civil Procedure, restraining and enjoining Armstrong, his agents, servants, employees, attorneys and those persons in active concert or participation with him who receive actual notice of the Order of Permanent Injunction, by personal service or otherwise, and each of them, from, directly or indirectly, engaging in the acts, practices or courses of business described above, or in conduct of similar purport and object, in violation of Sections 17(b) of the Securities Act [15 U.S.C. §77q(b)].
VI.
Grant an Order of Permanent Injunction, in a form consistent with Rule 65(d) of the Federal Rules of Civil Procedure, restraining and enjoining Defendants Tsai, Markow, Global Guarantee, Goelo, Yang, K&J, Luo, M&M, their agents, servants, employees, attorneys and those persons in active concert or participation with them who receive actual notice of the Order of Permanent Injunction, by personal service or otherwise, and each of them, from, directly or indirectly, engaging in the acts, practices or courses of business described above, or in conduct of similar purport and object, in violation of Sections 13(d)(1) and 16(a) of the Exchange Act [15 U.S.C. §§78m(d)(1) and 78p(a)] and Rules 13d-1(a) and 16a-3 promulgated thereunder [17 C.F.R. §§240.13d-1(a) and 240.16a-3].
VII.
Grant an Order of Permanent Injunction, in a form consistent with Rule 65(d) of the Federal Rules of Civil Procedure, restraining and enjoining Defendants Markow, Global Guarantee, Goelo, Yang, K&J, Luo, M&M, their agents, servants, employees, attorneys and those persons in active concert or participation with them who receive actual notice of the Order of Permanent Injunction, by personal service or otherwise, and each of them, from, directly or indirectly, engaging in the acts, practices or courses of business described above, or in conduct of similar purport and object, in violation of Sections 13(d)(2) of the Exchange Act [15 U.S.C. §78m(d)(2)] and Rule 13d-2(a) promulgated thereunder [17 C.F.R. §§240.13d-2(a)].
VIII.
Grant an Order requiring all Defendants to disgorge the ill-gotten gains that they received as a result of their wrongful conduct, including prejudgment interest.
IX.
Impose civil penalties against all Defendants in accordance with Section 20(d) of the Securities Act [15 U.S.C. §77t(d)] and Section 21(d)(3) of the Exchange Act [15 U.S.C. §78u(d)(3)].
X.
Retain jurisdiction of this action in accordance with the principals of equity and the Federal Rules of Civil Procedure in order to implement and carry out the terms of all orders and decrees that may be entered or to entertain any suitable application or motion for additional relief within the jurisdiction of this Court.
XI.
Grant Orders for such further relief as the Court may deem appropriate.
Respectfully Submitted,
___________________________
Amy Stahl Cotter
___________________________
Tracy W. Lo
Attorneys for
Plaintiff U.S. Securities and Exchange Commission
175 W. Jackson Blvd., Suite 900
Chicago, IL 60604
(312) 353-7390 (phone)
(312) 353-7398 (fax)
Dated: April 11, 2003
Modified: 04/14/2003
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