Dump The Pump

[scion]

Gendarme Generated Income by Purchasing Billions of Shares of Pink Sheets Stocks from the Issuers at a Discount to the Market Price and Quickly Distributing Them to the Public in Violation of the Securities Act

20. From early 2008 to at least May 2010, Gendarme bought stock from many Pink Sheets companies at a 30-50% discount to the market price. Rahimi and Lamphere jointly developed and executed Gendarme’s business strategy. Sometimes jointly, and other times individually, they made the decisions to purchase stock on Gendarme’s behalf. Each signed numerous agreements on Gendarme’s behalf to purchase issuer stock. Most of the agreements gave Gendarme warrants for up to one year in which Gendarme could elect to purchase the company’s stock. Other agreements were outright purchases of issuer stock. Within days or weeks of purchasing the stock, Rahimi or Lamphere caused Gendarme to resell most of the stock on the public market.

21. When it purchased shares from Pink Sheets issuers, Gendarme intended to, and did, sell shares to the public within a year. For those sales, Gendarme was an underwriter, and had no valid exemption from registration for the transactions.

22. For example, from March to September 2008, Gendarme entered into at least 11 warrant agreements with WGL Entertainment Holdings, Inc. (“WEHI”), which gave Gendarme the right to buy WEHI shares at a 30% discount to the market price at the time of purchase. The warrants represented that Gendarme would buy the WEHI shares for “investment purposes.” For each warrant, Armento wrote an opinion letter to WEHI’s stock transfer agent. Among other representations, the opinion letters asserted that the shares were issued to Gendarme in “an offering exempt from registration” and that Gendarme was not “an underwriter of the issuer.” From March to September 2008, Gendarme paid WEHI more than $615,000 for more than 6 billion shares purchased under the warrants. As Gendarme obtained WEHI shares, it sold most of them within days or weeks for gross sales of more than $780,000 and a profit of more than $165,000 through September 2008. In March 2009, WEHI changed its name to Heathrow Natural Food & Beverage, Inc. (“HRNF”). From then until March 2010, Gendarme purchased more than a billion HRNF shares, and, during the same time, repeated the process of regularly dumping the shares on the market, for gross sales of more than $430,000 and a net profit of more than $230,000.

24. From early 2008 to at least May 2010, Gendarme bought stock from at least 12 different issuing companies and distributed more than 15 billion shares in the public markets. None of the transactions was registered with the Commission. The transactions are summarized below.

a. HRNF, formerly known as WEHI: From March to September 2008, Gendarme acquired WEHI shares from the issuer. During the same period, Gendarme sold more than 6 billion of these WEHI shares for more than $780,000. From March 2009 to March 2010, Gendarme acquired HRNF shares from the issuer. During the same period, Gendarme sold more than 1 billion of these HRNF shares for over $430,000.

b. Macada, Inc. (“MCDA”), formerly known as Tri-Star Holdings, Inc. (“TSHL”), formerly known as Rapid Fitness, Inc. (“RPDI”): From June to August 2008, Gendarme acquired RPDI shares from the issuer. From July to September 2008, Gendarme sold more than 250 million of these RPDI shares for more than $145,000. From September 2008 through February 2009, Gendarme acquired TSHL shares from the issuer. Through August 2009, Gendarme sold more than 2.1 billion of these TSHL shares for more than $540,000. In September 2009, Gendarme acquired MCDA shares from the issuer. From September to December 2009, Gendarme sold more than 635,000 of these MCDA shares for more than $12,000.

c. Magellan, Inc. (“MGLG”): From May to June 2009, Gendarme acquired MGLG shares from the issuer. During July 2009, Gendarme sold 500 million of these MGLG shares for more than $355,000.

d. Perihelion Global, Inc. (“PHGI”): From March to June 2008, Gendarme acquired PHGI shares from the issuer. From March 2008 through March 2009, Gendarme sold almost 1.8 billion of these PHGI shares for more than $320,000.

e. Bederra Corp. (“BEDA”): From May 2009 to March 2010, Gendarme acquired BEDA shares from the issuer. Through April 2010, Gendarme sold more than 370 million of these BEDA shares for more than $610,000.

f. Z Com Networks, Inc. (“ZCMN”): From September 2008 to January 2009, Gendarme acquired ZCMN shares from the issuer. From September 2008 to June 2009, Gendarme sold more than 765 million of these ZCMN shares for almost $260,000.

g. RCC Holdings, Inc. (“RCCH”): From September 2008 through January 2009, Gendarme acquired RCCH shares from the issuer. From September 2008 to June 2009, Gendarme sold more than 2.1 billion of these RCCH shares for more than $210,000.

h. 141 Capital, Inc. (“ONCP”): From April 2009 to May 2010, Gendarme acquired ONCP shares from the issuer. From April 2009 to February 2010, Gendarme sold more than 710 million of these ONCP shares for almost $340,000.

i. RBID.com, Inc. (“RBID”): In May 2009, Gendarme acquired RBID shares from the issuer. From May 2009 to February 2010, Gendarme sold more than 400 million of these RBID shares for more than $65,000.

j. Brownstone Resources, Inc. (“BWNR”): From March to April 2009, Gendarme acquired BWNR shares from the issuer. From March to July 2009, Gendarme sold more than 110 million of these BWNR shares for more than $110,000.

k. Russell Industries, Inc. (“RUSL”): From May to June 2008, Gendarme acquired RUSL shares from the issuer. From May to October 2008, Gendarme sold more than 3 million of these RUSL shares for almost $19,000.

l. TidalWave Holdings, Inc. (“TWVH”): From June to October 2008, Gendarme acquired TWVH shares from the issuer. From December 2008 to January 2009, Gendarme sold more than 1.6 million of these TWVH shares for more than $30,000.


SEC Complaint in this matter
http://www.sec.gov/litigation/complaints/2011/comp21798.pdf


SEC CHARGES INVESTMENT FIRM WITH ILLEGALLY DUMPING BILLIONS OF PENNY STOCK SHARES

LITIGATION RELEASE NO. 21798 / January 6, 2011

Securities and Exchange Commission v. Gendarme Capital Corp., et al., Case No. 2:11-cv-00053-FCD-KJN (E.D. CA filed January 6, 2011)

SEC CHARGES INVESTMENT FIRM WITH ILLEGALLY DUMPING BILLIONS OF PENNY STOCK SHARES

The Securities and Exchange Commission today charged Gendarme Capital Corporation (“Gendarme”) and its two executives with engaging in an illegal stock distribution scheme.

The SEC alleges that Gendarme repeatedly acquired deeply discounted shares from penny stock issuers under the pretense of a long-term investment and then dumped the shares into the market, essentially effecting public stock distributions without complying with the disclosure requirements of the federal securities laws. Through its two principals – CEO Ezat Rahimi of Elk Grove, Calif., and vice president Ian Lamphere of Lawrenceville, Vt. – Gendarme sold more than 15 billion shares of at least a dozen companies, netting illicit profits of more than $1.6 million.

According to the SEC’s complaint, filed today in federal district court in Sacramento, Gendarme began entering into agreements with penny stock issuers in early 2008. The agreements gave Gendarme the right to purchase stock at 30 to 50 percent discounts to the market price. The SEC alleges that, in an effort to avoid the registration and disclosure obligations of the federal securities laws, Gendarme falsely represented to issuers that it was purchasing shares for “investment purposes only.” Contrary to those representations, Gendarme quickly dumped most of these shares on the public markets, profiting by more than $1.6 million from its unregistered stock distributions.

The SEC also alleges that Gendarme’s outside attorney — Cassandra Armento of Greenwich, N.Y. — violated the securities laws by issuing more than 50 false legal opinion letters in support of Gendarme’s activities. Armento repeatedly informed stock transfer agents that Gendarme was not an “underwriter” and thus had no intent to sell the stock. Thus, shares could be obtained by Gendarme without trading restrictions. However, the SEC alleges Armento made no inquiry into whether Gendarme intended to resell the stock, and was aware of information showing that it was likely that Gendarme was dumping the stock into the market.

In its federal court action, the SEC alleges Gendarme, Rahimi, Lamphere, and Armento violated Sections 5(a) and (c) of the Securities Act of 1933. Against Gendarme, Rahimi, and Lamphere, the SEC seeks injunctive relief, disgorgement of ill-gotten gains, monetary penalties, and an order barring them from participating in an offering of penny stock. The SEC seeks injunctive relief and monetary penalties against Armento.

SEC Complaint in this matter
http://www.sec.gov/litigation/complaints/2011/comp21798.pdf



http://www.sec.gov/litigation/litreleases/2011/lr21798.htm