888 F. Supp. 2d 1299
S.D. Fla.2012Background
- SEC filed its motion for summary judgment against Zigdon and Weinbaum (Feb. 24, 2012) in a stock manipulation case involving a fictitious company, C02 Tech Ltd.
- Defendants Weinbaum (businessman) and Zigdon (accountant) allegedly controlled a pump-and-dump scheme with shell creation and media manipulation.
- The scheme involved Red Sea Management (Costa Rica), a Nevada shell (China Energy) renamed to C02 Tech, and a Delaware-formed JB Investment Enterprises Ltd., with a false debenture tied to C02 Tech.
- Weinbaum funded shell acquisition and hired promoters to generate demand; Zigdon coordinated a fake media campaign and website for C02 Tech.
- Public statements and press releases falsely touted C02 Tech’s business prospects, including purported Boeing interest, while stock was being artificially inflated through matched orders.
- The court granted summary judgment on liability for Counts I, II, and IV, with damages to be determined later; counts concern 10(b)/10b-5, 17(a), and 5(a)/(c) securities acts and related provisions.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Violat ions of anti-fraud provisions | SEC argues Weinbaum and Zigdon violated 10(b)/10b-5 and 17(a) by manipulating and making false statements. | Weinbaum and Zigdon did not present a live factual dispute in response to the motion. | Yes; liability established under 10(b)/10b-5 and 17(a). |
| Section 5 liability for unregistered securities | SEC asserts defendants were necessary participants in interstate sale of unregistered securities. | Defendants did not contest the registration status in a manner raising genuine issues. | Yes; Section 5 liability established. |
Key Cases Cited
- Celotex Corp. v. Catrett, 477 U.S. 317 (U.S. 1986) (summary judgment standard; burden shifting to nonmovant)
- Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (U.S. 1986) (material facts and evidence favoring nonmovant; high standard for denial of summary judgment)
- SEC v. Brown & Co., 555 F. Supp. 2d 1275 (S.D. Fla. 2007) (SEC's lack of need to prove investor reliance,损ages in 10(b) and 17(a) actions)
- Ziemba v. Cascade Int’l Inc., 256 F.3d 1194 (11th Cir. 2001) (broader fraudulent schemes; scienter not required for certain SEC actions)
- SEC v. Calvo, 378 F.3d 1211 (11th Cir. 2004) (Section 5 prima facie elements include sale of unregistered securities)
- In re Global Crossing, Ltd. Securities Litig., 322 F. Supp. 2d 319 (S.D.N.Y. 2004) (fraud-on-a-scheme analysis; actionable deceptive acts)