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Post by Franko10 ™ on Sept 26, 2006 11:39:11 GMT -5
NASD Charges NevWest Securities Corporation and Principals With Violating Anti-Money Laundering Rules Tuesday September 26, 10:32 am ET Firm Failed to File Suspicious Activity Reports Despite Suspicious Sales of Hundreds of Billions of Shares of Sub-Penny Stock by Customer WASHINGTON, Sept. 26 /PRNewswire/ -- NASD announced today that it has charged NevWest Securities Corporation of Las Vegas and two of its top officers -- President Sergey Rumyantsev and Vice President Antony M. Santos -- with violating NASD's Anti-Money Laundering Rule. In its complaint, NASD charges that the firm failed to adequately implement and enforce procedures to detect and report suspicious transactions that the firm had reason to suspect involved possible securities fraud. Specifically, the complaint charges that the firm failed to conduct adequate due diligence and file appropriate Suspicious Activity Reports (SARs) in connection with highly suspicious transactions by a customer of the firm. NASD alleges that, during the relevant period, the customer opened 32 accounts at NevWest and sold more than 250 billion shares of a sub-penny stock, which generated total sales proceeds of over $53 million. NASD alleged that NevWest earned commission revenue on the sales totaling $2.5 million -- 36 percent of the firm's total revenues during the relevant period. "Suspicious Activity Reports provide law enforcement with information that's critical for investigating and prosecuting money laundering, terrorist financing and other financial crimes," said James S. Shorris, NASD Executive Vice President and Head of Enforcement. "Broker-dealers have an obligation to investigate 'red flags' indicating suspicious activity and, where appropriate, to file SARs. Despite a multitude of very obvious red flags, NevWest chose to look the other way, earning millions for itself in the process." NASD's complaint charges that between January 2003 and May 2005, NevWest, through Rumyantsev and Santos, failed to adequately perform due diligence, file SARs or cease trading in multiple accounts controlled by one of NevWest's customers in connection with more than 500 sale transactions. The transactions involved a sub-penny stock issued by CMKM Diamonds, Inc. (CMKM) that traded in the Pink Sheets until the Securities and Exchange Commission (SEC) revoked the stock's registration in 2005. The complaint further charges that the firm and its officers ignored numerous red flags which reasonably should have caused them to suspect that the customer was violating federal securities laws. The complaint charges that the firm should have filed suspicious activity reports with the U.S. Treasury Department's Financial Crimes Enforcement Network (FinCEN). Those red flags included: * The massive volume of CMKM stock that was being sold through NevWest by this customer, which constituted as much as 36.7% of CMKM's total outstanding shares; * Publicly available information about CMKM's financials indicating that CMKM had almost no assets. CMKM's last quarterly report, filed with the SEC on Nov. 18, 2002, showed that for the quarter ending September 2002, it had total assets of only $344 cash and total liabilities of $1,672; * CMKM's failure to file annual reports with the SEC for the fiscal years 2002, 2003 and 2004. * Information showing a relationship between the NevWest customer engaging in the suspicious transactions and a former officer of CMKM; * The SEC's temporary suspension of over-the-counter trading in CMKM securities from March 3, 2005 through March 16, 2005 and the SEC's action on May 10, 2005 to revoke the registration of each class of CMKM stock. From March 17, 2005 until May 11, 2005, NevWest continued to sell at least 22 billion shares for its customer's account. NASD also alleges that NevWest, through Santos, failed to comply with escrow account requirements and contingency offering terms, in violation of the federal securities laws and NASD rules; failed to timely report customer complaints and disclosure events pursuant to NASD rules, and failed to establish and maintain a supervisory system and procedures that were reasonably designed to detect and prevent these violations. Under NASD rules, a firm or individual named in a complaint can file a response and request a hearing before an NASD disciplinary panel. Possible remedies include a fine, censure, suspension, or bar from the securities industry, disgorgement of gains associated with the violations, and payment of restitution. The issuance of a disciplinary complaint represents the initiation of a formal proceeding by NASD in which findings as to the allegations in the complaint have not been made and does not represent a decision as to any of the allegations contained in the complaint. Because this complaint is unadjudicated, interested persons may wish to contact the respondent before drawing any conclusions regarding the allegations in the complaint. Investors can obtain more information about, and the disciplinary record of, any NASD-registered broker or brokerage firm by using NASD's BrokerCheck. NASD makes BrokerCheck available at no charge to the public. In 2005, members of the public used this service to conduct more than 4.3 million searches for existing brokers or firms and requested more than 194,000 reports in cases where disclosable information existed on a broker or firm. Investors can link directly to BrokerCheck at www.nasdbrokercheck.com. Investors can also access this service by calling (800) 289-9999. NASD is the leading private-sector provider of financial regulatory services, dedicated to investor protection and market integrity through effective and efficient regulation and complementary compliance and technology-based services. NASD touches virtually every aspect of the securities business -- from registering and educating all industry participants, to examining securities firms, enforcing both NASD rules and the federal securities laws, and administering the largest dispute resolution forum for investors and registered firms. For more information, please visit our Web site at www.nasd.com.
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Post by Franko10 ™ on Sept 26, 2006 20:36:58 GMT -5
NASD OFFICE OF HEARING OFFICERS DEPARTMENT OF ENFORCEMENT, Complainant, v. NEVWEST SECURITIES CORPORATION, (CRD No. 46464), SERGEY RUMYANTSEV, (CRD No. 4009791), and ANTONY M. SANTOS, (CRD No. 3239243), Respondents. Disciplinary Proceeding No. E0220040112-01 Hearing Officer - Note for electronic delivery this complaint: The issuance of a disciplinary complaint represents the initiation of a formal proceeding by NASD Regulation in which findings as to the allegations in the complaint have not been made and does not represent a decision as to any of the allegations contained in the complaint. Because this complaint is unadjudicated, you may wish to contact the respondent before drawing any conclusions regarding the allegations in the complaint.COMPLAINT The Department of Enforcement alleges: SUMMARY 1. From at least September 2002 to May 2005 (the “relevant period”), NevWest Securities Corporation (“NevWest”), a Nevada broker-dealer, violated various NASD Conduct Rules and provisions of the Securities Exchange Act of 1934 and the rules promulgated thereunder. 2. First, NevWest, acting through Sergey Rumyantsev (“Rumyantsev”) and Antony M. Santos (“Santos”), failed to adequately implement and enforce anti-money laundering (“AML”) procedures in accordance with NASD Conduct Rules 3011 and 2110, and NevWest violated Municipal Securities Rulemaking Board (“MSRB”) Rule G-41. For example, between January 1, 2003 and May 31, 2005, NevWest failed to adequately perform due diligence, file Suspicious Activity Reports (“SAR”) or cease trading in multiple accounts owned and controlled by JE, NevWest’s customer, regarding over 500 transactions, involving more than 250 billion shares of sub-penny stock issued by CMKM Diamonds, Inc. (“CMKM”) totaling over $53.0 million. As a result of these sales, NevWest earned commission revenue totaling $2.5 million, which accounted for approximately 36% of the firm’s total revenue during the relevant period. 3. Moreover, between January 2003 and December 2004, NevWest failed to adequately perform due diligence, file SARs, or cease effecting wire transfers involving $43 million through 139 separate wires from at least 28 of the accounts JE had opened at NevWest to various bank accounts. 4. Second, between February 2004 through July 2004, NevWest violated Section 15(c)(2) of the Securities Exchange Act of 1934 and SEC Rule 15c2-4 promulgated thereunder (“SEC Rule 15c2-4”) and NASD Conduct Rule 2110, and Santos violated NASD Conduct Rule 2110, in connection with the Ascendant Select Fund I, LLC contingency offering when NevWest, through Santos, caused funds to be withdrawn from bank escrow accounts prior to selling the minimum amount of securities through --- Page 2 --- bona fide transactions. NevWest thereby failed to properly escrow funds for the sales of securities until the contingencies were satisfied. 5. Third, between February 2004 through July 2004, NevWest and Santos violated Section 10(b) of the Securities Exchange Act of 1934 and SEC Rule 10b-9 promulgated thereunder (“SEC Rule 10b-9”) and NASD Conduct Rule 2110 in connection with the Ascendant Select Fund I, LLC contingency offering when NevWest, acting through Santos, released purchasers’ funds to the control of the issuer before the contingencies were satisfied through bona fide transactions, thereby rendering representations in the respective private placement memoranda false and misleading. 6. Fourth, between October 2003 through January 2004, NevWest violated SEC Rule 15c2-4 and NASD Conduct Rule 2110, and Santos violated NASD Conduct Rule 2110, in connection with the PracticeXpert, Inc. contingency offering when NevWest, through Santos, caused funds to be withdrawn from bank escrow accounts prior to selling the minimum amount of securities through bona fide transactions. NevWest thereby failed to properly escrow funds for the sales of securities until the contingencies were satisfied. 7. Fifth, between October 2003 and January 2004, NevWest and Santos violated SEC Rule 10b-9 and NASD Conduct Rule 2110 in connection with the PracticeXpert, Inc. contingency offering when NevWest, acting through Santos, released purchasers’ funds to the control of the issuer before the contingencies were satisfied through bona fide transactions, thereby rendering representations in the respective private placement memoranda false and misleading. 8. Sixth, between February 28, 2003 and September 2004, NevWest violated --- Page 3 --- NASD Conduct Rules 3070 and 2110 because it failed to timely file reports with NASD relating to customer complaints and disclosure events. 9. Seventh, between October 2003 and September 2004, NevWest, acting through Santos, violated NASD Conduct Rules 3010 and 2110 by failing to establish, maintain and enforce an effective supervisory system, including adequate written supervisory procedures, that was reasonably designed to achieve compliance with applicable federal securities laws and rules, and NASD Rules with respect to contingency offerings and the timely reporting of customer complaints and disclosure events. RESPONDENTS 10. NevWest, CRD No. 46464, has been a member of NASD since October 19, 1999. Since September 4, 2001, NevWest has been registered with the MSRB. NevWest is headquartered in Las Vegas, Nevada and employs approximately 10 registered representatives. During all times relevant to the complaint, NevWest primarily engaged in the liquidation of low-priced securities, sold largely in the over-the-counter market (“OTC”) including the Pink Sheets. NevWest also acts as a market maker in low-priced securities and participates in private placement offerings. 11. Rumyantsev, CRD No. 4009791, has been associated with NevWest since August 1, 1999. Rumyantsev became registered as a General Securities Representative (Series 7) in 1999, as an Equity Trader Representative (Series 55) in 1999, as a General Securities Principal (Series 24) in 1999, as a Municipal Securities Principal (Series 53) in 2001, as a Financial and Operations Principal (Series 27) in 2002 and as a Compliance Registered Options Principal (Series 4) in 2004. Rumyantsev also serves as NevWest’s Chief Executive Officer and Head Trader. --- Page 4 --- 12. Santos, CRD No. 3239243, has been associated with NevWest since April 30, 1999. Santos became registered as a General Securities Representative (Series 7) and as a General Securities Principal (Series 24) in July 1999. Santos also serves as the firm’s Executive Vice President, Chief Compliance Officer and on occasion as the firm’s General Counsel. FIRST CAUSE OF ACTION (INADEQUATE ANTI-MONEY LAUNDERING PROGRAM – Violation of NASD Conduct Rules 3011 and 2110 Respondents – NevWest, Santos and Rumyantsev and Violation of MSRB Rule G-41 – Respondent NevWest) 13. The Department realleges and incorporates by reference paragraphs 1 through 12 above. Broker-Dealer Responsibilities Under the Anti-Money Laundering Laws and Rules 14. NASD Conduct Rule 3011, adopted on April 24, 2002 and amended on October 22, 2002, requires all member firms to “develop and implement a written anti-money laundering program reasonably designed to achieve and monitor the firm’s compliance with the requirements of the Bank Secrecy Act (31 U.S.C. § 5311, et seq.), and the implementing regulations promulgated thereunder by the Department of the Treasury.” 15. NASD Conduct Rule 3011(a) requires NASD members to establish and implement policies and procedures “that can be reasonably expected to detect and cause the reporting of” suspicious activity and transactions. 16. The United States Department of the Treasury issued the implementing regulation, 31 CFR § 103.19(a)(1), on July 2, 2002, for suspicious transaction reporting --- Page 5 --- for broker-dealers. It provided that, with respect to any transaction after December 30, 2002, “[e]very broker or dealer in securities within the United States . . . shall file with FinCEN . . . a report of any suspicious transaction relevant to a possible violation of law or regulation.” Section (a)(2) of that regulation provides: A transaction requires reporting . . . if it is conducted or attempted by, at, or through a broker-dealer, it involves or aggregates funds or other assets of at least $5,000, and the broker-dealer knows, suspects, or has reason to suspect that the transaction (or a pattern of transactions of which the transaction is a part): (i) Involves funds derived from illegal activity or is intended or conducted in order to hide or disguise funds or assets derived from illegal activity (including, without limitation, the ownership, nature, source, location, or control of such funds or assets) as part of a plan to violate or evade any federal law or regulation or to avoid any transaction reporting requirement under federal law or regulation; (ii) Is designed, whether through structuring or other means, to evade any requirements of this part or any other regulations promulgated under the Bank Secrecy Act, . . .; (iii) Has no business or apparent lawful purpose or is not the sort in which the particular customer would normally be expected to engage, and the broker-dealer knows of no reasonable explanation for the transaction after examining the available facts, including the background and possible purpose of the transaction; or (iv) Involves use of the broker-dealer to facilitate criminal activity. 17. In August 2002, NASD issued Notice to Members (“NTM”) 02-47, which set forth the provisions of the final AML rule for suspicious transaction reporting promulgated by the United States Department of the Treasury (“Treasury”) for the securities industry. This NTM further advised broker-dealers of their duty to file a SAR for certain suspicious transactions occurring after December 30, 2002. NTM 02-47 --- Page 6 --- discusses Treasury’s release adopting the final suspicious activity reporting rule for broker-dealers. Treasury’s release states that broker/dealers should determine whether activities surrounding certain transactions raise suspicions of no business or apparent lawful purpose by looking for “red flags” such as those enumerated in NASD NTM 02-21. 18. NTM 02-21, which was adopted in April 2002, advised broker-dealer firms of the requirements of their AML procedures, including that AML procedures apply to: a. account opening and maintenance, including verification of the identity of the customer; b. monitoring of account activities, including but not limited to, trading and the flow of money into and out of the account, the types, amount, and frequency of different financial instruments deposited into and withdrawn from the account, and the origin of such deposits and the destination of withdrawals; and c. monitoring for, detecting, and responding to “red flags.” 19. NTM 02-21 emphasized each firm’s duty to detect red flags and, if it detects any, “perform additional due diligence before proceeding with the transaction.” NTM 02-21 also set forth examples of “red flags,” including but not limited to: a. Upon request, the customer refuses to identify or fails to indicate any legitimate source for his or her funds or other assets; b. The customer maintains multiple accounts, or maintains accounts in the names of family members or corporate entities, for no apparent business purpose or other purpose; c. For no apparent reason, the customer has multiple accounts under a single name or multiple names, with a large number of inter-account or third-party transfers; and d. The customer exhibits a lack of concern regarding risks, commissions, or other transaction costs. --- Page 7 --- 20. The SAR form indicates 20 “Type of suspicious activity” that must be reported, including “Market manipulation,” “Money laundering/Structuring,” “Prearranged or other non-competitive trading,” “Securities fraud,” “Significant wire or other transactions without economic purpose,” “Suspicious documents or ID presented,” “Wash or other fictitious trading,” “Wire fraud,” and “Other.”
21. MSRB Rule G-41, which the SEC approved on July 11, 2003, requires every NASD member broker, dealer and municipal securities dealer to establish and implement an AML compliance program designed to achieve and monitor ongoing compliance with the requirements of NASD Conduct Rule 3011. On July 16, 2003, the MSRB issued Notice 2003-28 announcing that Rule G-41 had been approved.
JE’s Activities at NevWest
22. In or about September 2002, JE began opening accounts with a registered representative at NevWest. From 2002 through December 2004, JE opened and controlled 32 accounts for various trusts and corporate entities, including one personal retirement account (collectively, “JE’s accounts”). JE opened: five accounts in 2002; 19 accounts in 2003; and eight accounts in 2004.
23. In or about January 2003 and continuing through at least January 2005, JE completed new account documents for some of the accounts opened with NevWest. For example, JE completed new account documents to reflect changes made to the various trusts and corporate entities. Additionally, JE completed new account documents for some of his accounts when NevWest switched clearing firms.
24. According to the new account documents, JE acted as Trustee on behalf of each of the 26 trust accounts he opened at NevWest. The Declaration of Trust documents
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JE submitted in connection with the trust accounts do not identify any beneficiary, but instead state that JE, as trustee, may sell units of beneficial interest in the trusts to purchasers.
25. JE also served as the sole officer and director for each of the five corporate accounts he opened at NevWest.
26. The customer address in 30 of JE’s 32 accounts was 7500 West Lake Meade Boulevard, Suite 9627, Las Vegas, Nevada 89128. JE also used his personal social security number as the tax identification number in 29 of JE’s 32 accounts.
27. Shortly after JE began opening accounts at NevWest, he developed a trading pattern of physically carrying into the firm, certificates of low-priced securities. In February 2003, JE began to deposit shares of CMKM into the various accounts he opened at NevWest. JE instructed NevWest, through his registered representative, to expeditiously liquidate the certificates, and to immediately wire all sales proceeds to various bank accounts. The bank account owner of record rarely matched the name of the NevWest account holders.
28. Until trading in CMKM shares was permanently halted by court order dated October 28, 2005, CMKM shares traded in the Pink Sheets, first under the symbol “CMKM,” and later under the symbol “CMKX,” through matched trades of unsolicited orders.
29. During the relevant period, JE sold approximately 259 billion shares of CMKM through NevWest, at an average price of $0.00021 per share. NevWest executed trades for JE’s accounts in agency transactions. During the relevant period the price of
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CMKM shares generally ranged from a high of $0.00057 per share in June 2004 to a low of $0.00005 price per share in May 2005.
Transactions in 2003
30. The number of transactions and the amounts of CMKM certificates JE sold through NevWest increased over time. During 2003, JE sold a total of 4.3 billion shares of CMKM, in 66 transactions, which resulted in sales proceeds to JE totaling over $401,000 as follows:
31. During 2003, JE wired a total of over $1.4 million from accounts with NevWest in 49 separate transactions, which included proceeds from the sale of CMKM stock. Transactions in 2004
32. In 2004, JE began to aggressively implement his trading strategy in CMKM shares. In many instances, JE carried into NevWest billions of CMKM shares at a time. Through NevWest, he liquidated billions of shares per month. For example, in
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February 2004, JE executed 35 transactions and sold over 11 billion shares, which resulted in sales proceeds totaling almost $592,000.
33. Moreover, between June 2004 and November 2004, JE sold, through NevWest, approximately 150 billion shares of CMKM in 257 transactions that generated proceeds totaling about $44.4 million. During this same period, JE wired from his accounts at NevWest to various bank accounts under his control, a total of $38 million in 57 separate wire transactions.
34. During 2004, JE sold approximately 207 billion shares of CMKM in 368 transactions that resulted in sales proceeds to JE totaling over $49 million as follows:
35. In early 2004, RD, the firm’s designated AML Compliance Officer, recommended to Santos that NevWest file a SAR regarding JE’s transactions in CMKM. Despite RD’s recommendations, Santos and Rumyantsev chose not to file a SAR. Moreover, in connection with JE, his accounts and sales of CMKM, Santos and Rumyantsev did not include RD in any AML-related discussion, analysis or decision.
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36. In or about August 2004, NevWest’s registered representative handling JE’s accounts recommended to Santos and Rumyantsev that NevWest file a SAR in connection with JE’s trading activities regarding the CMKM shares. Despite this registered representative’s recommendation, Santos and Rumyantsev declined to file a SAR.
37. In 2004, JE wired funds totaling over $41.5 million from his accounts at NevWest to various bank accounts under his control. Transactions in 2005
38. From January 1, 2005 through May 2005, JE sold over 48 billion shares of CMKM in 133 transactions that resulted in sales proceeds totaling $3.7 million as follows:
Red Flags
39. NevWest’s AML procedures stated that:
[w]hen a member of the firm detects any red flag he or she will investigate further under the direction of the AML Compliance Officer. This may include gathering additional information internally or from third party sources, contacting the government, freezing the account, and filing a SAR.
40. With respect to JE’s CMKM transactions and wire transfer activity referenced in the Complaint, NevWest failed to implement and enforce adequate AML
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procedures in violation of NASD Conduct Rule 3011 and, as a result, failed to “observe high standards of commercial honor and just and equitable principles of trade” as required by NASD Conduct Rule 2110. AML rules and NevWest’s own procedures required NevWest, under the direction of its AML Compliance Officer, to collect further information, perform additional due diligence, file a SAR and/or freeze JE’s accounts with respect to JE’s CMKM transactions, but NevWest failed to do so. NevWest, acting through Santos and Rumyantsev, was aware or should reasonably have been aware of “red flags,” which should have individually or collectively triggered NevWest’s AML obligations. These “red flags” included, but were not limited to, the following:
a. JE suspiciously refused to reasonably explain how he acquired the CMKM shares. In October 2004, Santos and Rumyantsev asked JE whether he could identify the individuals from whom he acquired his CMKM shares. In November 2004, JE provided NevWest with a letter from his personal attorney that stated the attorney had “reviewed the trading practices of [JE] and such practices appear to be in complete compliance with federal and Nevada law.” At no relevant time, did Santos or Rumyantsev ask JE to specifically identify the individuals and the details surrounding each transaction in which JE acquired the shares.
b. JE suspiciously opened and maintained 32 accounts at the firm for no business or apparent lawful purpose.
c. Over the relevant period, before liquidating his CMKM shares through NevWest, JE personally hand-delivered the CMKM certificates to the
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firm. The CMKM certificates JE deposited for sale were not always registered in the name of a specific account holder with NevWest. Instead, beginning in or about August 2004 and continuing into 2005, JE began depositing certificates registered in the name of NevWest’s clearing firm.
d. JE’s wire transfers from his NevWest accounts were suspicious in that the wire activity involved: large dollar amounts; frequent activity; and repetitive wire transfer patterns. In addition, JE generally instructed the firm to wire funds “as they became available” from the various NevWest accounts he established to, most often, only two Nevada bank accounts held by business entities which neither sold the CMKM certificates, nor maintained accounts at NevWest. The suspicious wire transfers included, without limitation, the following: of the 139 separate wire transactions from JE’s accounts, 116 were for amounts greater than $5,000, of which 57 were for amounts between $5,000 and $100,000; 30 were for amounts between $100,000 and $500,000; 17 were for amounts between $500,000 and $1 million; nine were for amounts between $1 million and $2 million; two wires exceeded $2 million; and one exceeded $4 million.
e. JE suspiciously exhibited a lack of concern regarding the commissions and other transaction costs relating to the liquidation of CMKM shares. NevWest uncharacteristically charged JE 5% for each transaction. The 5% commission was well-above NevWest’s
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customary rate of 3-4% it normally charged its customers for penny stock transactions.
f. The substantial number of CMKM shares NevWest received and was asked to sell for JE’s accounts, and the significant amount of sales proceeds resulting therefrom, should have prompted NevWest to conduct a searching inquiry to ensure that CMKM was complying with relevant laws and regulations. For example, NevWest failed to conduct a reasonable inquiry to obtain information regarding the number of CMKM shares issued to JE, and specific details concerning how and when JE acquired his CMKM shares, in order to comply with minimum standards imposed on broker-dealers to prevent and detect violations of the federal securities laws and to ensure that the firm met its continuing responsibility to know both its customer and the securities being sold.
41. During the relevant period, NevWest, acting through Santos and Rumyantsev, was aware or should reasonably have been aware of public information including, without limitation, the following:
a. CMKM’s 10-QSB filing with the Securities and Exchange Commission (“SEC”), dated November 18, 2002, showed the address of the principal executive office as 7500 West Meade Boulevard, Suite 9627, Las Vegas, Nevada 89128; and telephone number (702) 683-3722. JE used this address and phone number on many of the new
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account documents at NevWest. This address is a UPS postal box located within about six miles of NevWest’s offices.
b. CMKM’s 10-QSB filing with the SEC, dated November 18, 2002, was signed by IM. IM appears on several of JE’s trust documents provided to NevWest as part of the new account documentation. During relevant times to the complaint, IM was the former President, director and shareholder of CMKM, and IM also acted as the Registered Agent on behalf of CMKM.
c. CMKM’s last 10-QSB filing with the SEC, dated November 18, 2002, showed that for the quarter ending September 2002, CMKM reported total assets of $344.00, all in cash, and total liabilities of $1,672.00.
d. CMKM did not file any annual reports on Form 10-KSB with the SEC for its fiscal years ending December 31, 2002, 2003, and 2004.
e. CMKM did not file any quarterly reports on Form 10-QSB since November 18, 2002, and therefore, did not file quarterly reports for the periods ended: March 31, June 30, and September 30, 2003; March 31, June 30, and September 30, 2004; and March 31, 2005.
f. CMKM did not make any SEC filings during the period of July 22, 2003 to February 17, 2005. Consequently, investors did not have any financial information regarding CMKM during the period that NevWest sold over 235 billion shares on behalf of JE’s accounts.
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g. By September 2004, NevWest should have been aware that it had sold for JE more than 10% of the outstanding shares of CMKM. Specifically, between March 2003 and May 2005, NevWest sold for JE’s accounts, in the aggregate, as many as 36.7% of CMKM’s total outstanding shares.
h. CMKM engaged in a promotional campaign, in, amongst other places, Nevada, designed to raise interest in its stock. CMKM sponsored a NHRA funny car. The car is called the CMKXTREME vehicle. Promotional items such as T-shirts and hats with “Got CMKX?” written on the front were handed out at race events. All of this activity was used to encourage investors to purchase shares of CMKM through trading activity on the pink sheets.
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