03/16/2012 2 Summons Issued as to All Defendants. Counsel receiving this notice electronically should download this summons, complete one for each defendant and serve it in accordance with Fed.R.Civ.P. 4 and LR 4.1. Summons will be mailed to plaintiff(s) not receiving notice electronically for completion of service. (Maynard, Timothy) (Entered: 03/16/2012)
31. In 2005, defendant Bordynuik was the founder and head of a data recovery and restoration company called John Bordynuik, Inc. Bordynuik had developed software that facilitated the recovery of archived institutional data stored on old magnetic media. John Bordynuik, Inc. sold and developed that software.
32. Through a series of related transactions, John Bordynuik, Inc. would become JBI. At all times during the existence of John Bordynuik, Inc., and its successor entities, including JBI, Bordynuik headed the Company’s business operations, including third party transactions.
33. JBI is a development stage company which claims to have found the recipe for an inexpensive catalyst which, when used in the process of heating waste plastic to high temperatures in the absence of oxygen, a process commonly known as pyrolysis, can purportedly produce a crude oil equivalent for a total cost of under $10 per barrel. The Company named this process “Plastic2Oil” or “P2O.” The Company further claims that refineries have offered to purchase the oil product for just a few dollars under the price of West Texas Intermediate crude oil, a price which currently sits above $105 per barrel. As per defendant Bordynuik’s public statements in 2009, each processor will cost around $80,000, will be able to produce 109 barrels of this crude oil equivalent per day and can be constructed so quickly that Bordynuik said the Company’s “plan is to launch 2,500 sites over the next few years.”
34. In fact, Bordynuik has kept the fabled catalyst a secret and so far he has been reluctant to provide any evidence whatsoever of commercial viability.
35. Regardless, investors loved the story and in early 2010, JBI’s stock jumped from around $1.00 to over $7.00 per share almost overnight. It didn’t hurt that on February 12, Bordynuik put out nineteen press releases in a single day and that a number of stock promotion sites were also working to raise awareness of the company.
36. On or around April 24, 2009, Bordynuik acquired a majority interest in and became the CEO and CFO of an existing shell company known as 310 Holdings, Inc., a Nevada corporation.
37. On July 15, 2009 in a purportedly arm’s length transaction, 310 Holdings purchased the assets of John Bordynuik, Inc. The Company’s assets at that time consisted mostly of data recovery equipment. However, in various public filings dating back to at least late 2009, the Company claimed to have developed a commercial process capable of converting plastic waste into oil, known as “Plastic2Oil.”
38. On August 24, 2009, 310 Holdings purchased 100% of the outstanding shares of Javaco, Inc. (“Javaco”). Javaco was a wholly owned subsidiary of Domark International (“Domark”). 310 Holdings paid $150,000 in cash and issued 2,500,000 shares of 310 Holdings’ common stock as payment for the acquisition of Javaco. Bordynuik announced that Javaco was acquired to operate and manage the Company’s Plastic2Oil processing sites in Mexico. Pursuant to a separate agreement, Domark’s CEO sold and/or assigned media credits (the “Media Credits”) to 310 Holdings. The Media Credits purportedly allowed their holder to purchase $9,997,134 worth of prepaid advertising and marketing promotions. As consideration for the assignment of the Media Credits, 310 Holdings issued 1,000,000 shares of common stock valued at $1,000,000 total ($1.00 a share as of August 24, 2009).
39. Also in late 2009, Bordynuik wrote agreements and contracts to build 45 of his Plastic2Oil sites in cooperation with a major developer in Florida, to build shipboard processors which would clean up the Pacific garbage patch as well as process plastic waste generated on islands, and to set up three joint ventures with other parties to build Plastic2Oil sites in Ohio and Florida.
40. A month later, Bordynuik acquired a Florida company called Pak-it, LLC for $4.6 million in stock and notes. Pak-it, LLC had a subsidiary named Dickler Chemical Laboratories which was in the business of manufacturing and selling industrial cleaning products. Neither the Javaco nor Pak-it acquisitions made much sense in light of trying to commercialize P2O. Together, their operations generated net losses, but they certainly made JBI look bigger. For a company which had no assets a couple of months earlier, that was significant.
41. On October 5, 2009, 310 Holdings changed its name to JBI, Inc. and Bordynuik remained as CEO and CFO of the newly named company. As such Bordynuik certified all of JBI’s financial statements including those filed with the Form 10-Q for the period ending September 30, 2009 that was filed on November 16, 2009 and the financial statements included with the form 10-K for the year ended 2009 filed on March 31, 2010. Both the Form 10-Q and the Form 10-K were filed with the SEC. In addition, the Form 10-K was certified by defendant Baldwin and signed by defendants Bordynuik, Baldwin, Smith, Bradshaw, Wesson, and Goldberg.
42. In both its third quarter financial statements filed in the Form 10-Q on November 16, 2009 (for the third quarter ended September 30, 2009) and its end of year financial statements filed in the Form 10-K on March 31, 2010 (for year ended December 31, 2009), JBI reported the value of the Media Credits purchased from Domark to be $9,997,134, their purported face value.
43. The valuation of the Media Credits certified by both Bordynuik and Baldwin was false, misleading and contrary to GAAP. Bordynuik and Baldwin knew the valuation was false and inaccurate when they certified the 10-Q and 10-K, and they did so with the intent to mislead and deceive JBI investors as to the true net worth of the Company. Moreover, the Audit Committee at the time was made up of defendants Bradshaw, Wesson, and Goldberg, each of whom eschewed their duties and responsibilities by not ensuring such an obvious inaccuracy was corrected by JBI.
44. The $9,997,134 valuation was allegedly based on the price that Domark supposedly paid for the Media Credits when it purchased them from a company called Media4Equity LLC (“Media4Equity) on August 13, 2008. However that valuation was severely flawed given JBI had paid $1 million to purchase the Media Credits on the open market. As such, the $1,000,000 that JBI paid Domark as consideration for the Media Credits was both a reliable basis for valuing the Media Credits and a correct reflection of the perceived value of the Media Credits at the time of the transaction.
45. JBI deliberately mislead investors and the public by using the purported face value of the Media Credits, rather than their actual cost. In doing so, the Company overstated the total value of its assets by a minimum of $8,997,134 (the $9,997,134 value reported less the actual $1,000,000 paid) as of both September 30, 2009 and December 31, 2009.
46. Because the Media Credits constituted one of JBI’s biggest assets as listed on their financial statements, the deliberate misstatement of their value served to drastically inflate the value of the Company in the eyes of the investing public. The Individual Defendants then used the inaccurate financial statements to obtain more than $8.4 million from private capital investors.
05/03/2012 6 Assented to MOTION for Extension of Time to July 27, 2012 to respond to pleading (plaintiff's complaint) by Robin Bagai, Ronald C Baldwin, Jr., John Bordynuik, Amy Bradshaw, Gregory Goldberg, Theodore J Henry, Jacob Smith, John M Wesson.(Wheatley, John) (Entered: 05/03/2012)
05/03/2012 5 NOTICE of Appearance by John Wheatley on behalf of Robin Bagai, Ronald C Baldwin, Jr., John Bordynuik, Amy Bradshaw, Gregory Goldberg, Theodore J Henry, Jacob Smith, John M Wesson (Wheatley, John) (Entered: 05/03/2012)
05/03/2012 4 NOTICE by Erwin Grampp NOTICE OF VOLUNTARY DISMISSAL PURSUANT TO FED. R. CIV. P. 41(a)(1)(A)(i) AS TO DEFENDANT JAMES FAIRBAIRN ONLY (Pastor, David) (Entered: 05/03/2012)
05/03/2012 3 NOTICE of Appearance by Edward D. Shoulkin on behalf of JBI, Inc. (Shoulkin, Edward) (Entered: 05/03/2012)
United States District Court District of Massachusetts (Boston) CIVIL DOCKET FOR CASE #: 1:12-cv-10495-MLW Grampp v. Bordynuik et al Assigned to: Chief Judge Mark L. Wolfrelated Case: 1:12-cv-10012-MLW
Cause: 28:1332 Diversity-Breach of Fiduciary Duty Date Filed: 03/16/2012 Jury Demand: Plaintiff Nature of Suit: 850 Securities/Commodities Jurisdiction: Federal Question Plaintiff Erwin Grampp derivatively on behalf of JBI, Inc. represented by David Pastor Pastor Law Office, LLP 63 Atlantic Avenue 3rd Floor Boston, MA 02110 617-742-9700 Fax: 617-742-9701 Email: dpastor@gilmanpastor.com ATTORNEY TO BE NOTICED
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