Washington, D.C., March 20, 2007 – LawFuel.com – Investment & Securities Law – The Securities and Exchange Commission today announced a civil injunctive action alleging that a Utah-based corporation and its Chief Executive Officer made at least $1.5 million selling shares to investors while disseminating false claims of a lucrative purchase order from the Department of Homeland Security (DHS).
In its complaint, filed today in the United States District Court for the Eastern District of Pennsylvania, the Commission alleged that Cyberkey Solutions, Inc. of St. George, Utah, and its CEO James E. Plant, between November 2005 and the present, have engaged in an ongoing unregistered offering of Cyberkey shares, promoted with a series of false press releases describing a putative purchase order worth in excess of $24 million from DHS to buy Cyberkey’s flash memory drives. In fact, the Commission’s complaint alleges, Cyberkey had no business relationship at all with DHS. Additionally, according to the complaint, Cyberkey and Plant made other false statements to unsuspecting investors, including statements claiming Cyberkey had shipped products to DHS and received payments pursuant to the phony purchase order, and that Cyberkey was in the process of preparing and releasing audited financials.
Linda Chatman Thomsen, the Director of the Commission’s Enforcement Division, said, “The perpetrators of this scheme carried out an extensive fraud and even went so far as to make false claims about the Department of Homeland Security – an Agency whose mission is critical to all Americans. Our response to this kind of conduct will always be swift and firm.”
Commission Enforcement Division Associate Director Cheryl Scarboro noted, “CyberKey and its CEO orchestrated an intense fraud campaign that clearly duped investors – in the three months leading up to the first of CyberKey’s alleged multiple false press releases, CyberKey trading volume was just over 550,000 shares per day – but once the scheme began, daily trading volume swelled dramatically to between 10 million and 80 million shares per day.”
The Commission’s complaint further alleges, that, as a result of their scheme, the defendants violated Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and seeks as relief permanent injunctions against future violations of these provisions by the defendants, and disgorgement of all the defendants’ ill-gotten gains, including prejudgment interest and civil penalties.
In a related criminal action, Plant was arrested on March 13, 2006, in St. George, Utah, by agents of the Federal Bureau of Investigation’s Philadelphia Economic Crimes Squad on charges of securities fraud and aiding and abetting securities fraud.
The Commission acknowledges the assistance and cooperation of the Federal Bureau of Investigation, the Office of the United States Attorney for the Eastern District of Pennsylvania and the National Association of Securities Dealers in the investigation of this matter.