Those Wolfson boys are at it again. This time they
have been accused of bilking investors out of $6.6 million. According
to reports in the Salt Lake Tribune, Allen Z. Wolfson, his son David M.
Wolfson and Michael S. Newman have been indicted by a federal grand jury
on nine counts of wire fraud.
The three men purportedly established a bogus company called Stem Genetics, which claimed to be conducting stem cell research. The indictment claims that Stem Genetics did not conduct any stem cell research – and did not employ anyone qualified to do so. The defendants reportedly dumped unregistered shares of Stem Genetic stock overseas, at inflated prices – targeting investors in Great Britain, Australia and New Zealand.
Potential investors were told that the Company's shares would soon trade on NASDAQ, at a price of $7 a share, around 20% more than the price they were paying. Those customers were charged high commission, which were not disclosed.
The charges are reminiscent of those leveled in an earlier case against David Wolfson – also involving the sale of unregistered stock overseas. In 2004, the Securities and Exchange Commission charged David Wolfson with orchestrating a scheme that involved the sale of shares under Regulation S, which permits oversea sale of unregistered shares to non-U.S. residents. It seems that Wolfson and his colleagues found struggling U.S. companies that were hungry for cash (and occasionally formed the companies themselves) and then arranged for them to sell stock to a British Virgin Island corporation called Sukomo at a deep discount - 30% of the bid price.
Since Sukomo was purportedly a non-U.S, citizen, the stock was sold without registration under Regulation S. There were a few problems with this setup, as the SEC discovered. First, Sukomo actually was a boiler room operating from Laos and Thailand, and looking for stock to dump on overseas investors. Second and more important as far as Regulation S is concerned, Sukomo may have been a non-U.S. resident but it never was a bona fide purchaser. In reality, Sukomo was simply acting as a broker and the proceeds from its boiler room operation were going back to Wolfson, his colleagues, and to a lesser extent, the issuing companies. See, Beware The Evil Twins.
The Salt Lake Tribune reports that Allen Wolfson is awaiting sentencing in New York for securities fraud and Newman is serving a prison sentence in Laos for a financial crime. A spokesperson for the U.S. Attorney's Office in Salt Lake City says that the SEC has recovered about $1.5 million of the funds lost by investors to the Stem Genetics scheme.
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The three men purportedly established a bogus company called Stem Genetics, which claimed to be conducting stem cell research. The indictment claims that Stem Genetics did not conduct any stem cell research – and did not employ anyone qualified to do so. The defendants reportedly dumped unregistered shares of Stem Genetic stock overseas, at inflated prices – targeting investors in Great Britain, Australia and New Zealand.
Potential investors were told that the Company's shares would soon trade on NASDAQ, at a price of $7 a share, around 20% more than the price they were paying. Those customers were charged high commission, which were not disclosed.
The charges are reminiscent of those leveled in an earlier case against David Wolfson – also involving the sale of unregistered stock overseas. In 2004, the Securities and Exchange Commission charged David Wolfson with orchestrating a scheme that involved the sale of shares under Regulation S, which permits oversea sale of unregistered shares to non-U.S. residents. It seems that Wolfson and his colleagues found struggling U.S. companies that were hungry for cash (and occasionally formed the companies themselves) and then arranged for them to sell stock to a British Virgin Island corporation called Sukomo at a deep discount - 30% of the bid price.
Since Sukomo was purportedly a non-U.S, citizen, the stock was sold without registration under Regulation S. There were a few problems with this setup, as the SEC discovered. First, Sukomo actually was a boiler room operating from Laos and Thailand, and looking for stock to dump on overseas investors. Second and more important as far as Regulation S is concerned, Sukomo may have been a non-U.S. resident but it never was a bona fide purchaser. In reality, Sukomo was simply acting as a broker and the proceeds from its boiler room operation were going back to Wolfson, his colleagues, and to a lesser extent, the issuing companies. See, Beware The Evil Twins.
The Salt Lake Tribune reports that Allen Wolfson is awaiting sentencing in New York for securities fraud and Newman is serving a prison sentence in Laos for a financial crime. A spokesperson for the U.S. Attorney's Office in Salt Lake City says that the SEC has recovered about $1.5 million of the funds lost by investors to the Stem Genetics scheme.
IF YOU HAVE QUESTIONS OR COMMENTS FOR STOCKPATROL.COM, CONTACT US AT editor@stockpatrol.com
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