Used to see like 5 a week from these guys. Either companies have wised up or more likely few cripples left to stake. Certainly proves some PIPEs are even more toxic than others. From iHub Yorkville board. Thanks krays. http://investorshub.advfn.com/boards/read_msg.aspx?message_id=50795883
----------------- Very interesting excerpts from the recently filed ammended complaint. Substitute NEOM for Cobalis and the story is almost identical. I uploaded the entire complaint at the following link
UNITED STATES BANKRUPTCY COURT FOR THE CENTRAL DISTRICT OF CALIFORNIA SANTA ANA DIVISION In re COBALIS CORP., a Nevada corporation, Debtor. _______________________________ COBALIS CORP., a Nevada corporation, Plaintiff, vs. CORNELL CAPITAL PARTNERS, LP, YORKVILLE ADVISORS, LLC, and, YA GLOBAL INVESTMENTS, LP, _______________________________ Defendants. Case No. 8:07: 12347-TA Adversary No. 08:09-ap-01705-TA Chapter 11 Proceeding FIRST AMENDED COMPLAINT Case 8:09-ap-01705-TA Doc 10 Filed 05/17/10 Entered 05/17/10 16:56:32 Desc Main Document Page 1 of 21
Case 8:09-ap-01705-TA Doc 10 Filed 05/17/10 Entered 05/17/10 16:56:32 Desc
Plaintiff, COBALIS CORP. (“Cobalis” or “Debtor”), respectfully represents and alleges:
19. Inherent in every contract entered into under New Jersey law is the obligation of the parties thereto to act in good faith as to the performance of their contracts. 20. The convertible Debentures provided YAGI with the right to convert them into common stock after a registration with the SEC became effective. 21. The price at which the conversion would take place was to be calculated according to a formula insuring that the purchase price was at less than the then-current market price. 22. The transaction set forth above is considered a PIPE transaction. 23. YAGI is one of the largest (if not the largest) participants in PIPE transactions and has entered into over 350 transactions with publicly traded companies since 2001. 24. The PIPE transactions entered into by YAGI can be fairly described as “designed to fail,” as 75% or more of the 350-plus PIPE transactions entered into by YAGI between 2001 and 2008 are with public companies that are no longer in business. Nonetheless, during that same time period, YAGI claims that the fund “never had a down month.” 25. These transactions, unknown at their inception to the publicly traded companies, were designed to fail. It was never intended that the loans made by YAGI would ever be paid back in cash. 26. YAGI’s purposeful omission to disclose to Cobalis that the entire transaction was designed to fail was a material failure to disclose a fact essential to Cobalis’ understanding of the proposed transaction. 27. YAGI’s economic incentive was to misuse the convertibility feature of the debentures, which YAGI stated in the transaction documents would enable YAGI to participate as a long-term investor in the prosperity of the borrowing public company. 28. Instead, YAGI decided it could make more money by shorting the stock of its borrower and then covering the short sales with shares converted from the Debentures. 29. Continued shorting resulted in ever-decreasing market prices. 30. If the borrower could be driven out of business, and delisted, then the shorts would never need to be covered as it would be impossible to deliver the stock. 31. The general rule for short sales is that a trader does not report gain or loss until he closes his position by delivering stock to either the counter-party or the lender of the share certificates. 32. In other words, all of the profits earned by YAGI through short selling shares of Cobalis would be tax free if Cobalis would cease to exist. 33. It was therefore a transparent exercise in bad faith for YAGI to put Cobalis into Ch. 7 and seek its liquidation in order to avoid the payment of taxes. 34. Only a handful of the companies that entered into PIPE transactions with YAGI are still in business. 35. YAGI misrepresented to Cobalis that it hoped that its early purchase of Cobalis shares, which could begin in April 2007, would mature into sizable capital gains in the future. 36. It was never disclosed to Cobalis that the true purpose of the conversion feature was to enable YAGI to “cover” short sales of Cobalis, which began in or about April 2007. 37. The Securities Purchase Agreement expressly provides that YAGI would not short the stock of Cobalis.
Pennies not a zero sum game as much as some zero game.
Register for free to join our community of investors and share your ideas. You will also get access to streaming quotes, interactive charts, trades, portfolio, live options flow and more tools.