The SEC Charges Diane Dalmy, and Others in Pump and Dump Scheme
Posted on August 5, 2013
—SEC Action l Securities Lawyer 101
Securities Lawyers Gone Wild Series
On July 31, 2013, the Securities and Exchange Commission (“SEC”) brought an enforcement action against securities lawyer, Diane Dalmy and other the entities and individuals responsible for a pump and dump scheme involving Zenergy International (ZENG) in 2009. Among those named in the SEC enforcement action were Zenergy itself; Bosko Gasich, a founder and principal shareholder of ZENG; Scott Wilding, who provided the public shell used for Zenergy’s reverse merger; Robert Luiten, ZENG’s CEO; Diane Dalmy, a Florida securities attorney; Dale Baeten, a stock promoter; and several other promoters. The most interesting thing about the SEC’s charges is that the complaint reads more like an indictment than a civil action.
The Friends and Family Round
The SEC also charged friends and family members of Gasich who were allegedly involved in the securities fraud scheme. According to the SEC action, Gasich arranged a reverse merger between Zenergy, a private company purportedly involved in the biofuel business, and a public shell company known as Paradigm Tactical Products. Dalmy served as the securities attorney for the transaction. Gasich then created phony convertible debt, backdating it so that 300 million shares could be issued as unrestricted stock, with the help of legal opinion letters written by Dalmy. He then distributed the stock to his friends and family (including his then-fiancée), the promoters, several associates of Paradigm, and Dalmy.
friends and family (including his then-fiancée), the promoters, several associates of Paradigm, and Dalmy.
The Pump
According to the SEC, a stock promotion of Zenergy followed, conducted with the help of Luiten, who issued a number of misleading press releases. The promotion was allegedly facilitated by Baeten, Charles Bennett, George Bowker. It is well-known to observers who followed the ZENG pump that Montreal tout Dan Ryan and his website Penny Stock Chaser were also part of the ZENG promotion. Dan Ryan, who was sued and sanctioned by the SEC several years ago, is not named in the instant action, but is referenced as “the Website Owner.” The website in question was Penny Stock Chaser.
The Dump
Despite what was touted in ZENG’s press releases, Zenergy had no business, and no realistic prospects of business. As the stock price rose, fueled by the promotion and message board chatter, the recipients of the 300 million shares, including Gasich and Dalmy, sold for tidy profits.
The SEC Action
“This case covers a broad range of parties who were involved in various aspects of a pump-and-dump scheme to make illicit profits at the expense of the investing public,” said Timothy L. Warren, Acting Director of the Chicago Regional Office. “These individuals included a complicit CEO, Gasich’s family and friends, a securities lawyer who issued improper legal opinion letters, and promoters who touted the stock without disclosing they had something to gain.”
Some of the defendants have already settled their SEC action with the SEC. The agency seeks disgorgement, financial penalties, penny stock bars against Zenergy, Dalmy, Luiten, Martino, and Wilding, and an officer and director ban against Luiten.
The Bottom Line l What Is Really Going On
The Zenergy case is one of a number of recent SEC enforcement actions brought in connection with fraudulent reverse mergers, and a further indication that the agency is taking a lively interest in securities attorneys who enable microcap fraud by writing dishonest legal opinions in connection with reverse merger transactions.
This blog post is provided as a general informational service to clients and friends of Hamilton & Associates Law Group about the dangers and risks of reverse merger transactions. This post should not be construed as, and does not constitute, legal and compliance advice on any specific matter, nor does ths message create an attorney-client relationship. For more information concerning the rules and regulations affecting the use of Rule 144, Form 8K, FINRA Rule 6490, Rule 506 private placement offerings, Regulation A, Rule 504 offerings, SEC reporting requirements, SEC registration on Form S-1 and Form 10, Pink Sheet listing, OTCBB and OTCMarkets disclosure requirements, DTC Chills, Global Locks, reverse mergers, public shells, go public direct transactions and direct public offerings please contact Hamilton & Associates or visit http://www.securitieslawyer101.com.
Hamilton & Associates | Securities Lawyers
Brenda Hamilton, Securities Attorney
101 Plaza Real South, Suite 202 North
Boca Raton, Florida 33432
Telephone: (561) 416-8956
Facsimile: (561) 416-2855
www.SecuritiesLawyer101.com
