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Strategies & Market Trends : Anthony @ Equity Investigations, Dear Anthony, -- Ignore unavailable to you. Want to Upgrade?

To: scion who wrote (111237)	10/7/2010 8:46:48 PM
From: scion	Respond to of 122088

A. The Defendants’ Scheme 15. On January 6 and 7, 2010, Charbit telephoned the cooperating witness to plan the details. Under the scheme, Charbit and Korem agreed to pay a kickback of $3,000 in cash and $100,000 in ZNext restricted stock to the broker in exchange for him buying $300,000 of ZNext stock over several weeks. 16. The cooperating witness informed the Defendants the broker owed a fiduciary duty to his clients, and there would be a problem if the broker’s superiors or the Commission discovered the kickback. The Defendants agreed the kickback should remain undisclosed and agreed to disguise it by issuing the stock to a third party – the broker’s girlfriend. Unbeknownst to the Defendants, the broker’s girlfriend was a fiction created for this operation. 17. Additionally, Charbit told the cooperating witness Korem had control over the substance of the substance and timing of ZNext’s press releases. He indicated this could assist in masking the broker’s trades. B. The Defendants Deliver a Kickback of Cash and Stock 18. On January 8, 2010, Charbit met with the cooperating witness in Coral Gables, Florida. At that meeting, Charbit gave the cooperating witness $3,000 in cash as part of the broker’s kickback. Charbit also told the cooperating witness he would have Korem issue the remaining portion of the kickback as $100,000 of ZNext restricted stock in the name of the broker’s girlfriend. 19. Also at that meeting, Charbit gave the cooperating witness a draft press release for ZNext. Korem designed the press release to mask any spike in trading volume caused by the broker’s stock purchase. The press release indicated ZNext would be fast-tracking its gold mining activities to take advantage of rising gold prices. Charbit agreed to issue the press release on January 14, 2010. 20. Later that day, Korem, in his position as ZNext’s transfer agent, issued $100,000 of ZNext restricted stock in the girlfriend’s name. Charbit sent a copy of the stock certificate to the cooperating witness via e-mail that evening. 21. On January 14, 2010, ZNext issued a press release that was nearly identical to the one Charbit presented to the cooperating witness the previous week. With the cover for the broker’s buying in place, the Defendants believed the scheme would commence. 22. On January 15, 2010, the FBI purchased 25,000 shares of ZNext stock on the open market for a total cost of $1,000. The FBI’s purchase constituted 22% of the volume for that day. The average daily trading volume for ZNext shares had been approximately 53,600 shares per day for the previous ten trading days. 23. The following day the cooperating witness told Charbit the broker’s compliance officer questioned the trade and the broker was pulling out of the deal. 24. As a result, Charbit made numerous attempts to recapture the kickback. He repeatedly e-mailed and telephoned the cooperating witness demanding the return of the stock certificates he had paid as part of the kickback. Charbit’s attempts to recover the kickback were unsuccessful. SEC Complaint v. Charbit and Korem sec.gov