COMMISSION SETTLES A HIGH PROFILE MANIPULATION CASE
The Commission essentially concluded its action arising out of a scheme by Adnan M. Khashoggi, a well known Saudi arms dealer, and Ramy Y. El-Batrawi others based on the manipulate the of the shares of GenesisIntermedia, Inc. (“GENI”) while misappropriating more than $130 million. SEC v. El-Batrawi, Case No. CV-06-2247 (C.D. Cal. Filed Apr. 13, 2006). According to the complaint, Defendants El-Batrawi and Khashoggi obtained most of the money by loaning about 15 million shares of GENI stock through Native Nations Securities Inc. and other brokers to Deutsche Bank Securities Limited in exchange for cash. The scheme was facilitated by defendants Richard Evanglista, Wayne Breedon and others who lead Native Nations and Deutsche Bank to believe that the shares of GENI loaned were from a reputable brokerage firm. In fact, most of the stock came from Mr. El-Batrawi and Ultimate Holdings, an offshore entity controlled by him and Mr. Khashoggi.
Part of the scheme centered on inflating the share price of GENI. Messrs. El-Batrawi, Khashoggi, Breedon and Evanglista accomplished this by engaging in several manipulative practices. Those include reducing the supply of GENI stock while maintaining control of the float, promoting a short squeeze after they had sold their shares, paying financial commentators to tout the stock and making false statements in periodic filings and press releases. In addition, thousands of trades were placed through nominee accounts to create the appearance of widespread investor interest.
Each of the defendants settled with the Commission, except Ultimate Holdings which is defunct and Mr. Khashoggi. Mr. El-Batrawi consented to the entry of a permanent injunction prohibiting future violations of the antifraud provisions and an officer/director bar for five years. Mr. Jacobson consented to the entry of a permanent injunction prohibiting future violations of Securities Act Section 17(a)(3) and Section 13(a)(5). He also agreed to pay a penalty of $15,000. Richard Evangelista agreed to the entry of a permanent injunction prohibiting future violations of the antifraud provisions. He also agreed to the entry of an order requiring him to pay disgorge of $25,000 and a penalty of $15,000 as well as an order barring him from association with a broker dealer in a parallel administrative proceeding. Mr. Breedon consented to the entry of a permanent injunction prohibiting future violations of the antifraud provisions. All financial payments were waived based on financial condition. GenesisIntermedia consented to being delisted in a related administrative proceeding. See also Litig. Rel. 21475 (Apr. 2, 2010).