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Friday must be his day off. This internet door thing just makes me think about the Ebay sales. I see that the company on Ebay has now sold @5 ballast in the last 6 months. At this pace he will be a millionare in @200,000 years in my opinion.
This is an nonoffical account of current sales, but it does show that a few are being sold. You can check for yourself on Ebay to verify.
It takes money to keep the doors open. With no proof of sales, or even that any cash is coming in, what would anyone think. In most cases the landlord doesn't even kick you out until you miss multiple payments.
Dreaming that this company is going to be great and reality so far is totally different in my opinion.
Are the doors even open?
If they are, will they be selling everything on ebay?
since they don't need any desk, chairs and etc.
Why have an office if you aren't making any sales?
you can always have the phones forward, so they work,
so shareholders can call.
Yes they are my opinions.
In reality Debt kills dreams, companies, and etc.
With the amount of money that has been posted in public statements and the lack of credit that has been shown, these guys are going to need some "white knight" to help them make any sales of any size that is big enough to help out the share price in my opinion.
Show me the "white knight".
otherwise I feel my investment is going to be a write off.
There is no way that these guys can make a sale of any size without someone buying the parts from china for them in my opinion. In that case all the extra profits will be ate up by that 3rd party and will not help the stock out.
Management has created too high amount of debt by mismanagement to ever overcome in my opinion.
Face the facts of debt. As we have seen from the history of this company, there has not been no 100 million dollar sales to create some type of hope for this company in the present or the past.
Just because you own stock in the company doesn't mean anything when management has spent more than what the company is valued in my opinion.
Still no comments from management.
Bankruptcy clears up problems
I wonder if that is what everyone is talking about when it comes to clearing things up.
Same old story just hold on to the endless line of just wait. Look back at post 3, 6, 9, 12 months ago, one could just copy and paste the same "wait" over and over to save time.
Debt from Interest, and late payments has to be overtaking any possible profits in my opinion. For every one step forward these guys seem to be going three steps back.
Just because someone invested @$1000 dollars in the stock to make it pop a little, doesn't mean anything.
Once you are under debt it is a long hard road with sales to come back, and there still isn't any sales being announced now for months.
No News just Negative Press
In my opinion if I was a President, CEO I would of issued a statement. Since no statements have been released it makes me wonder towards the dark side.
GE is at CES with their home energy products, and even on CNBC.
Where was Axis at??? No news of any sales has been made public in a while, or even if they are even working. Not even a comment on the illegal stuff that has been going on. In my opinion - not good.
Notification of Disposition of Collateral from Gemini Strategies, LLC ("Gemini") informing Axis that the previously announced sale of the Note of the Security Agreement dated April 25, 2010 scheduled for sale on November 18 was rescheduled for Thursday, December 9, 2010 for failing to make full payment thereunder by July 1, 2010. The failure to pay principal and interest by July 1, 2010 constitutes an Event of Default under the Note and, thereore, a default under the security agreement. The balance due under the Note was $2,092,064.92 as of September 24, 2010. As earlier indicated, Axis is actively working with Gemini Strategies to attempt to cure this default, including obtaining financing from alternative sources.
In my opinion theses guys don't have $2.09 million to pay off the debit. Even if they pay off the 2.09 million, what will they have left?
Andrea R. Wood (IL Bar # 6256883)
Michael M. Cabonargi (IL Bar # 6273780)
United States Securities and Exchange Commission
175 West Jackson Boulevard, Suite 900 Chicago, Illinois 60604 Telephone: (312) 353-7390
Facsimile: (312) 353-7398
Email: woodar@sec.gov; cabonargimm@sec.gov
Attorneys for Plaintiff
DANIEL G. BOGDEN
United States Attorney
District of Nevada
Blaine T. Welsh (NV Attorney Reg. No. 4790)
Assistant United States Attorney
United States Attorney’s Office
333 Las Vegas Boulevard, Suite 5000
Las Vegas, Nevada 89101
Telephone No.: (702) 388-6336
Facsimile: (702) 388-6787
Email: Blaine.Welsh@usdoj.gov
Associate Resident Counsel
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEVADA
UNITED STATES SECURITIES )
AND EXCHANGE COMMISSION, )
)
Plaintiff, )
)
v. ) Civil Action No.:
)
MARCUS LUNA, NATHAN MONTGOMERY, )
ADAM DASKIVICH, DAVID MURTHA, ) Jury Trial Demanded
ST. PAUL VENTURE FUND LLC, )
MINNESOTA VENTURE CAPITAL, INC., )
REAL ESTATE OF MINNESOTA, INC., and )
MATRIX VENTURE CAPITAL, INC., )
)
Defendants. )
COMPLAINT
Case 2:10-cv-02166 Document 1 Filed 12/14/10 Page 1 of 17
Plaintiff, the United States Securities and Exchange Commission (“Commission”), alleges as follows:
SUMMARY
1. Defendant Marcus Luna orchestrated a scheme in which he and the other Defendants violated the registration provisions of the federal securities laws. In doing so, he and the other Defendants received ill-gotten gains totaling approximately $6.88 million from November 2006 to December 2007. In furtherance of his scheme, Luna violated the antifraud provisions of the federal securities laws.
2. Defendant Luna, an attorney, coordinated a reverse merger between privately-held Axis Technologies, Inc. and a company whose shares were publicly traded and quoted on the Pink Sheets, operated by Pink OTC Markets Inc. (“Pink Sheets”). He then arranged for a reverse stock split. In engaging in these transactions, Luna made false and misleading statements to officers of Axis Technologies, Inc.
3. Defendant Luna had previously recruited Defendants Nathan Montgomery, Adam Daskivich and David Murtha to work with him. Along with Defendant Luna, all of the individual Defendants resided in Henderson, Nevada. In a matter of just five days, Luna incorporated several corporate entities in the state of Minnesota. Luna set himself up as the principal of Defendant St. Paul Venture Fund (“St. Paul VF”). He set up Montgomery, Daskivich, and Murtha as the principals of Defendants Minnesota Venture Capital, Inc. (“Minnesota VC”), Real Estate of Minnesota, Inc. (“Real Estate MN”), and Matrix Venture Capital, Inc. (“Matrix VC”), respectively (collectively, the “Defendant Entities”). None of the Defendant Entities conducted any legitimate business operations. Luna created them simply to serve as straw men.
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Case 2:10-cv-02166 Document 1 Filed 12/14/10 Page 2 of 17
4. Defendant Luna then wrote and issued a false legal opinion letter to a transfer agent claiming that the shares of common stock issued by the newly-formed public company, Axis Technologies Group, Inc., were not restricted and were freely tradable. One of his bases for this claim was that St. Paul VF, Minnesota VC, Real Estate MN and Matrix VC were accredited investors under Minnesota and federal law. This was false. Defendant Luna knew that the Defendant Entities did not meet the definition of accredited investors. Amongst other reasons, Luna had created the Defendant Entities to act as conduits to allow him and his cohorts, Defendants Montgomery, Daskivich, and Murtha, to sell their stock into the public market at artificially supported prices.
5. Defendants Luna, Montgomery, Daskivich and Murtha, through the Defendant Entities, gained approximately $1.6 million, $1.4 million, $2.4 million and $1.3 million, respectively, from their unregistered stock sales. From their profits, Montgomery, Daskivich, and Murtha paid Luna approximately $1.7 million in kickbacks.
6. Through the activities alleged in this Complaint, Luna violated the antifraud provisions of Section 17(a) of the Securities Act of 1933 (“Securities Act”) [15 U.S.C. §77q(a)] and Section 10(b) of the Securities Exchange Act of 1934 (“Exchange Act”) [15 U.S.C. §78j(b)], and Rule 10b-5 thereunder [17 C.F.R. §240.10b-5]. In addition, Luna, Montgomery, Daskivich, Murtha and the Defendant Entities violated the registration provisions of Sections 5(a) and 5(c) of the Securities Act [15 U.S.C. §§77e(a) and (c)].
JURISDICTION AND VENUE
7. The Commission brings this action pursuant to authority conferred upon it by Section 20(b) of the Securities Act [15 U.S.C. § 77t(b)] and Section 21(d)(1) of the Exchange Act [15 U.S.C. § 78u (d)(1)].
3
Case 2:10-cv-02166 Document 1 Filed 12/14/10 Page 3 of 17
8. This Court has jurisdiction over this action under the provisions of Section 22(a) of the Securities Act [15 U.S.C. § 77v(a)] and Section 27 of the Exchange Act [15 U.S.C. § 78aa].
9. Venue is proper in this Court pursuant to Section 22(a) of the Securities Act [15
U.S.C. § 77v(a)] and Section 27 of the Exchange Act [15 U.S.C. § 78aa].
10. Defendants, directly and indirectly, have made and, unless enjoined, will continue to make use of the means and instrumentalities of interstate commerce and of the mails in connection with the acts, practices and courses of business alleged herein in the District of Nevada and elsewhere.
THE DEFENDANTS
11. Marcus Luna is a resident of Henderson, Nevada. Luna is Manager of St. Paul Venture Fund LLC and Taurus Capital Corporation, and owner of the law firm Luna & Vining APC.
12. Nathan Montgomery is a resident of Henderson, Nevada. Montgomery is President of Minnesota Venture Capital, Inc.
13. Adam Daskivich is a resident of Henderson, Nevada. Daskivich is President of Real Estate of Minnesota, Inc.
14. David Murtha is a resident of Henderson, Nevada. Murtha is President of Matrix Venture Capital, Inc.
15. St. Paul Venture Fund is a limited liability company that was incorporated in Minnesota on October 19, 2005 and is currently inactive according to the Minnesota Secretary of State. Luna is the founder, sole officer, sole director and sole employee of St. Paul VF.
4
Case 2:10-cv-02166 Document 1 Filed 12/14/10 Page 4 of 17
16. Minnesota Venture Capital, Inc. is a domestic corporation that was incorporated in Minnesota on October 20, 2005 and is currently inactive according to the Minnesota Secretary of State. Montgomery is the founder, sole officer, sole director and sole employee of Minnesota VC.
17. Real Estate of Minnesota, Inc. is a domestic corporation that was incorporated in Minnesota on October 20, 2005 and is currently inactive according to the Minnesota Secretary of State. Daskivich is the founder, sole officer, sole director and sole employee of Real Estate MN.
18. Matrix Venture Capital, Inc. is a domestic corporation that was incorporated in Minnesota on October 24, 2005 and is currently inactive according to the Minnesota Secretary of State. Murtha is the founder, sole officer, sole director and sole employee of Matrix VC.
THE COMPANY
19. Axis Technologies Group, Inc. is a Delaware corporation with its principal place of business in Lincoln, Nebraska. It designs, manufactures and markets a proprietary line of energy-saving electronic dimmers to regulate fluorescent lighting in office buildings, retail buildings, hospitals, schools and government buildings. Its common stock is registered pursuant to Section 12(g) of the Exchange Act and is quoted on the Pink Sheets. Axis Technologies Group, Inc.’s predecessor company was Axis Technologies, Inc., which was privately held.
FACTS
A. Creation of Axis Technologies Group, Inc.
20. In 2006, James Erickson and Kipton Hirschbach, President and CEO respectively of the privately-held corporation Axis Technologies, Inc., sought financing to expand the company’s operations. They were referred to Luna to help raise capital.
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Case 2:10-cv-02166 Document 1 Filed 12/14/10 Page 5 of 17
21. Luna identified Riverside Entertainment as a non-reporting company whose shares were quoted on the Pink Sheets. He advised Erickson and Hirschbach that Axis Technologies, Inc. should engage in a reverse merger with Riverside Entertainment and issue and sell shares in the newly-named public company to accredited investors. Erickson and Hirschbach agreed. Luna drafted and faxed to them the Share Exchange and Acquisition Agreement and other necessary paperwork for the reverse merger.
22. On September 21, 2006, Luna signed and emailed to Hirschbach a “Term Sheet for Equity Financing” on the letterhead of his company Taurus Capital Corporation that stated, in part:
Axis will be acquired by a public company, RIVERSIDE ENTERTAINMENT, INC. (“RVEN”), a Delaware corporation, with its common stock traded on the National Quotation Bureau Pinksheets, on a solicited basis with the trading symbol: RVEN. This acquisition shall occur concurrently with the investment of USD $300,000.00 into AXIS by an investment group for approximately 25% of AXIS. RVEN proposes offering to certain subscribers who qualify as “Accredited Investors” as that term is defined in Rule 501 of Regulation D of the Securities Act of 1933, as amended… based upon an exemption from registration found in Rule 504 of Regulation D of the Securities Act.
I currently have confirmed funds available for the initial investment of $300,000.00 from the exempt subscribers and expect to have authorization from RVEN management to enter into the agreement today.
(Emphasis added)
23. Erickson and Hirschbach signed and faxed the Share Exchange and Acquisition Agreement back to Luna. Thereafter, the entity formerly known as Riverside Entertainment engaged in a 1-for-1000 reverse stock split and changed its name to Axis Technologies Group, Inc., so that Riverside Entertainment shareholders received 1 share of Axis common stock for every 1,000 shares of Riverside Entertainment common stock they held.
24. Luna then drafted an agreement pursuant to which the newly-created Axis Technologies Group, Inc. acquired the privately-held company called Axis Technologies, Inc., in
6
Case 2:10-cv-02166 Document 1 Filed 12/14/10 Page 6 of 17
exchange for the common stock of the public company Axis Technologies Group, Inc. Erickson and Hirschbach became the President and CEO of Axis Technologies Group, Inc. (hereinafter “Axis Group”).
25. On October 24, 2006, Luna mailed a letter to Axis Group identifying the four purported accredited investors – St. Paul VF, Minnesota VC, Real Estate MN and Matrix VC – which agreed to execute subscription agreements and purchase a total of 15,000,000 shares of Axis Group stock for $300,000. Luna paid for the shares from an account in the name of his law firm, Luna & Vining APC.
26. Erickson relied on Luna to confirm that the entities that Luna presented to Axis Group were accredited investors under the law. Luna was the sole intermediary between Axis Group and his claimed accredited investors; he communicated the sales price to the other accredited investors and prepared the subscription agreements for the purchase of Axis Group stock by the alleged accredited investors.
B. Luna’s accredited investors were shams
27. To qualify as an “accredited investor” under the federal securities laws, a business entity must not have been formed for the specific purpose of acquiring the securities offered and its total assets must exceed $5 million. A business entity also may qualify as an “accredited investor” if all of its equity owners are themselves “accredited investors.” If any of the equity owners of the business entity is a natural person, that person must have a net worth in excess of $1 million or individual annual income of in excess of $200,000 in each of the two most recent years to qualify as an “accredited investor.”
28. The Defendant Entities did not meet the conditions to qualify as accredited investors, and Defendant Luna knew it.
7
Case 2:10-cv-02166 Document 1 Filed 12/14/10 Page 7 of 17
29. Defendant Luna formed St. Paul VF, Minnesota VC, Real Estate MN and Matrix VC for the specific purpose of trading securities identified by Luna, including subsequently, Axis Group’s stock. Luna incorporated these four entities in Minnesota within days of each other, i.e., from October 19 to October 24, 2005.
30. The sole principals and employees of St. Paul VF, Minnesota VC, Real Estate MN and Matrix VC – Defendants Luna, Montgomery, Daskivich and Murtha – never lived in Minnesota. They all lived in Henderson, Nevada during the relevant period.
31. The Defendant Entities’ tax returns and other business records listed the Nevada addresses of Defendants Luna, Montgomery, Daskivich and Murtha.
32. The Defendant Entities’ only presence in Minnesota was the $200/month desk and post office box each of them rented at a corporate office suite near the Minneapolis airport from 2005 through 2007.
33. Consequently, Defendants St. Paul VF, Minnesota VC, Real Estate MN and Matrix VC were nominee corporations created by Defendant Luna to attempt to misuse the Minnesota registration exemption.
34. Moreover, none of the Defendant Entities had assets in excess of $5 million. Specifically, during the relevant time, St. Paul VF had approximately $100,000 in assets, Minnesota VC had approximately $720,000 in assets, and Matrix VC and Real Estate MN each had approximately $15,000 in assets.
35. Further, Defendants Montgomery, Daskivich and Murtha acknowledged that their entities failed to meet the requisite accredited investor asset threshold when they signed and filed the entities’ tax returns. Specifically, Montgomery stated in its corporate tax return for the year ending 2006 that Minnesota VC had less than $1 million in assets. On its corporate tax returns
8
Case 2:10-cv-02166 Document 1 Filed 12/14/10 Page 8 of 17
for 2006, Murtha reported that Matrix VC had total assets of $210 in 2006 and paid $115,000 in compensation to its sole officer Murtha. On its corporate tax return for 2007, Daskivich reported that Real Estate MN had total assets of $0.97 in 2007 and paid no compensation to its sole officer Daskivich.
36. Similarly, Defendants Luna, Montgomery, Daskivich and Murtha each failed to meet the requisite accredited investor asset thresholds for income or net worth requirements for natural person accredited investors.
B. Luna’s False Opinion Letter
37. Soon after he emailed the letter to Axis Group identifying the Defendant Entities as purported accredited investors, Defendant Luna made additional false statements in furtherance of his scheme.
38. On October 24, 2006, Luna mailed an opinion letter to Axis Group’s transfer agent advising the transfer agent that 15,000,000 Axis Group shares may be issued as “free trading” and without a restrictive legend.
39. In support of his claimed opinion, Defendant Luna asserted an exemption from the registration requirements of the federal securities laws. However, Luna misrepresented the facts and the nature of the transactions to the transfer agent in order to facilitate his scheme.
40. Defendant Luna asserted that the Axis Group shares could be issued to the Defendant Entities pursuant to the exemption from registration under Rule 504 of Regulation D under the Securities Act [17 C.F.R. §230.504], which permits the sale of stock according to state law exemptions that permit general solicitation and general advertising so long as the sales are made only to accredited investors. 9
Case 2:10-cv-02166 Document 1 Filed 12/14/10 Page 9 of 17
41. Defendant Luna falsely represented to the transfer agent that the Defendant Entities qualified as accredited investors organized and domiciled in Minnesota. To support his contention, Defendant Luna attached the subscription agreement signature pages for the Defendant Entities, signed by Defendants Luna, Montgomery, Daskivich and Murtha, each of whom represented and warranted that his respective Defendant Entity was an accredited investor.
42. Defendant Luna further stated to the transfer agent that a state law exemption from registration in Section 80A.15 of the Minnesota statutes and related regulations permits general solicitation, i.e. advertising, without prior approval or filing of the solicitation materials with the State of Minnesota, so long as the sales are made only to accredited investors. However, Minnesota law is silent on general advertising and does not expressly permit general solicitation of investors.
43. Defendant Luna then falsely concluded to the transfer agent that the offers and sales to accredited investors were transactions exempted from registration with the Securities and Exchange Commission pursuant to Rule 504 and Minnesota law.
44. Based on Defendant Luna’s false opinion letter, on October 25, 2006, the transfer agent issued 15,000,000 shares of Axis Group to St. Paul VF, Minnesota VC, Real Estate MN and Matrix VC without a restrictive legend.
45. In addition to perpetrating the reverse merger and reverse stock split for Axis Group and drafting and mailing the fraudulent opinion letter to the transfer agent, Defendant Luna took additional affirmative steps to initiate public trading in Axis Group’s stock. Specifically, Luna filed the paperwork with NASDAQ to obtain the “AXTG” ticker symbol for Axis Group and he submitted unaudited financial statements to the Pink Sheets so that Axis Group stock could be quoted.
10
Case 2:10-cv-02166 Document 1 Filed 12/14/10 Page 10 of 17
C. Alleged Accredited Investors Quickly Profited From Shares
46. On November 2, 2006, Luna mailed to Axis Group’s transfer agent board resolutions from St. Paul VF, Minnesota VC, Real Estate MN and Matrix VC. These resolutions were essentially identical and were signed by Defendants Luna, Montgomery, Daskivich and Murtha, respectively.
47. The Defendant Entities’ November 2, 2006, board resolutions instructed the transfer agent to cancel their original Axis Group stock certificates and divide and reissue the 15,000,000 shares in certificates of smaller amounts in the names of the Defendant Entities and certain stock promoters. The following day, the transfer agent did as instructed.
48. On November 9, 2006, Defendants Luna, Montgomery, Daskivich, Murtha and the stock promoters returned their stock certificates to the transfer agent to reissue the shares in the name of Legent Clearing LLC. Legent Clearing was the clearing firm for Franklin Ross, Inc. (“FRI”), a brokerage firm where Luna, Montgomery, Daskivich and Murtha maintained trading accounts for the Defendant Entities.
49. On November 13, FRI began submitting stock quotes for Axis Group on the Pink Sheets for sale to the public and Axis Group’s shares began trading. That day, the trading volume for Axis Group was over four million shares. Before November 13, Axis Group’s previous trading volume was significantly lower. Specifically, from October 20, i.e., its first day of trading under the new ticker symbol of AXTG, to November 12, Axis Group’s daily trading volume averaged 2,261 shares. From November 13, 2006 to February 16, 2007, the average daily trading volume for Axis Group was 845,838 shares.
50. Similar to its volume, the price of the unregistered shares of Axis Group skyrocketed. From October 20 to November 12, 2006, Axis Group’s share price averaged $0.93
11
Case 2:10-cv-02166 Document 1 Filed 12/14/10 Page 11 of 17
per share. On November 13, Axis Group’s stock price opened trading at $1.25 per share and closed that day at $1.05 per share, its highest closing price to date. From November 13, 2006 to February 16, 2007, Axis Group’s stock price peaked at $3.47 on November 27, 2006.
51. During this period, the stock promoters were issuing press releases, faxes and emails regarding Axis Group and the company’s sales and sales prospects. The trading volume and price of Axis Group stock increased accordingly and provided a market into which the Defendants could and did sell their Axis Group stock.
52. From November 13, 2006 throughout 2007, Defendants Luna, Montgomery, Daskivich and Murtha sold significant portions of their unregistered Axis Group stock into the public market. As detailed below, through Luna’s scheme, they earned a net total of $6,881,566 from their collective sales of 4,819,014 shares of Axis Group stock. The breakdown is as follows:
Name
Entity
Date Received Shares
Date of Sale of Shares
To Public
# Shares Sold to Public
Gain
$ Paid to Luna
Marcus Luna
St. Paul Venture Fund LLC
Oct. 25, 2006
Nov. 13, 2006 through
May 16, 2007
1,022,092
$1,612,704
n/a
Nathan Montgomery
Minnesota Venture Capital Inc.
Oct. 25, 2006
Nov. 13, 2006 through
Dec. 5, 2007
1,238,269
$1,472,601
$161,100
Adam Daskivich
Real Estate of Minnesota, Inc.
Oct. 25, 2006
Nov. 13, 2006 through
Dec. 14, 2007
1,796,653
$2,417,522
$1,415,728
David Murtha
Matrix Venture Capital, Inc.
Oct. 25, 2006
Nov. 13, 2006 through
Feb. 15, 2007
762,000
$1,378,739
$122,821
53. In addition to his trading profits, for his efforts, Defendant Luna received $1,699,649, collectively, in payments from Defendants Montgomery, Daskivich, and Murtha.
54. In contrast to the millions of dollars improperly taken by the Defendants, Axis Group earned only $300,000 in capital, which they used for operations.
12
Case 2:10-cv-02166 Document 1 Filed 12/14/10 Page 12 of 17
COUNT ONE
Violations of Sections 5(a) and 5(c) of the Securities Act
(Against All Defendants)
55. The Commission realleges and incorporates by reference the allegations of paragraphs 1-54.
56. The shares of Axis Group that Defendants offered and sold to public investors are “securities” as that term is defined in Section 2(a)(1) of the Securities Act [15 U.S. C. §77b(a)(1)] and Section 2(10) the Exchange Act [15 U.S.C. §78(b)(10)].
57. The Defendants, and each of them, by engaging in the conduct described above, directly or indirectly, made use of means or instruments of transportation or communication in interstate commerce or of the mails, to offer to sell or to sell securities, or to carry or cause such securities to be carried through the mails or in interstate commerce for the purpose of sale or for delivery after sale.
58. No registration statements were filed with the Commission or were in effect with respect to any of the offerings alleged herein.
59. By reason of the foregoing conduct, the Defendants violated and, unless restrained and enjoined, will continue to violate Sections 5(a) and 5(c) of the Securities Act [15 U.S.C. §§77e(a) and (c)].
COUNT TWO
Violation of Section 17(a)(1) of the Securities Act
(Against Defendant Luna)
60. The Commission realleges and incorporates by reference the allegations of paragraphs 1-54.
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Case 2:10-cv-02166 Document 1 Filed 12/14/10 Page 13 of 17
61. As set forth above, Luna, in the offer and sale of securities, by the use of the means and instruments of transportation and communication in interstate commerce and by the use of the mails, directly and indirectly, has employed devices, schemes and artifices to defraud.
62. In the offer and sale of securities and as part of the scheme to defraud, Luna made false and misleading statements of material fact and omitted to state material facts to investors and prospective investors as more fully described above.
63. Luna engaged in the conduct alleged herein knowingly or with reckless disregard for the truth.
64. By engaging in the conduct described above, Luna violated Section 17(a)(1) of the Securities Act [15 U.S.C. §77q(a)(1)].
COUNT THREE
Violation of Sections 17(a)(2) and 17(a)(3) of the Securities Act
(Against Defendant Luna)
65. The Commission realleges and incorporates by reference the allegations of paragraphs 1-54.
66. As described above, Luna, in the offer or sale of securities, by use of means or instruments of transportation or communication in interstate commerce or by use of the mails, directly or indirectly: (a) obtained money or property by means of untrue statements of a material fact or omitted to state material facts necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading; and/or (b) engaged in transactions, practices, or courses of business that operated or would operate as a fraud or deceit upon the purchaser.
67. Luna acted at least negligently with respect to the facts and circumstances described above.
14
Case 2:10-cv-02166 Document 1 Filed 12/14/10 Page 14 of 17
68. By engaging in the conduct described above, Luna violated Section 17(a)(2) and (3) of the Securities Act [15 U.S.C. §§77q(a)(2) and (a)(3)].
COUNT FOUR
Violation of Section 10(b) of the Exchange Act and Rule 10b-5 Thereunder
(Against Defendant Luna)
69. The Commission realleges and incorporates by reference the allegations of paragraphs 1-54.
70. At the times alleged in the Complaint, Luna, in connection with the purchase and sale of securities, by the use of the means and instrumentalities of interstate commerce and of the mails, directly and indirectly, has employed devices, schemes and artifices to defraud; has made untrue statements of material fact and has omitted to state material facts necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading; and has engaged in acts, practices and courses of business which have operated as a fraud and deceit upon purchasers and sellers of such securities.
71. Luna engaged in the conduct alleged herein knowingly or with reckless disregard for the truth.
72. By reason of the foregoing, Luna violated Section 10(b) of the Exchange Act [15 U.S.C. §78j(b)], and Rule 10b-5 thereunder [17 C.F.R. § 240.10b-5].
PRAYER FOR RELIEF
WHEREFORE, the Commission respectfully requests that the Court:
I.
Enter an Order of Permanent Injunction as to each Defendant, in a form consistent with Rule 65(d) of the Federal Rules of Civil Procedure, restraining and enjoining Defendants from violating Sections 5(a) and 5(c) of the Securities Act and, in addition, restraining and enjoining
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Defendant Luna from violating Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder.
II.
Enter an Order requiring Defendants to disgorge all ill-gotten gains resulting from their participation in the conduct described above, including pre-judgment interest.
III.
Enter an Order requiring the Defendants to pay civil penalties pursuant to Section 20(d) of the Securities Act [15 U.S.C. §77t(d)] and Section 21 (d)(3) of the Exchange Act [15 U.S.C. §78u(d)(3)].
IV.
Enter an Order barring Defendants from participating in any offering of penny stock pursuant to Section 20(g) of the Securities Act [15 U.S.C. §77t(g)] and Section 21(d)(6) of the Exchange Act [15 U.S.C. §78u(d)(6)].
V.
Enter an Order requiring Defendant Luna to disgorge fees earned in facilitating the purported Rule 504 offering of Axis.
VI.
Enter an Order prohibiting Defendant Luna from providing professional legal services to any person in connection with the offer or sale of securities pursuant to, or claiming, an exemption under Regulation D, including, without limitation, participating in the preparation or issuance of any opinion letter related to such offerings. 16
Case 2:10-cv-02166 Document 1 Filed 12/14/10 Page 16 of 17
17
VII.
Grant such other and further equitable relief as this Court deems appropriate and necessary.
JURY TRIAL DEMAND
Plaintiff hereby demands a jury trial on all claims so triable.
Dated: December 14, 2010 Respectfully submitted,
/s/ Andrea R. Wood Andrea R. Wood (IL Bar # 6256883)
Michael M. Cabonargi (IL Bar # 6273780)
Attorneys for Plaintiff U.S. Securities and Exchange Commission
175 W. Jackson Blvd., Suite 900 Chicago, Illinois 60604 (312) 353-7390 (phone)
(312) 353-7398 (fax)
woodar@sec.gov
cabonargimm@sec.gov
Case 2:10-cv-02166 Document 1 Filed 12/14/10 Page 17 of 17
AXTG + SEC investigation gives you about 166 results on a popular search engine.
In my opinion that is HEAT - do you think people are in line to give loans to an company that just been thru something like this?
By all appearances AXTG, Hirschbach and Erickson have been exonerated by the SEC for now. Do you, or does anyone know what more the SEC will find on the computers, phone calls, and etc. of the vegas guys now that they have access to them since the charges are filed. Who said this investigation is complete? I have no idea but common sense tells me that if there is more it will come out. Look it took the SEC 4 years to find this much, just think of all the new info they found after coming in and taking over.
Nathan B. Montgomery is already a key figure in an earlier investigation on Mesa Energy Holdings Inc.(MSEH.OB). Mesa Energy announced in August that it was the subject of an SEC investigation. So there was a possibility that someone knew this was coming.
DHAB LLC & Interstate Realty Corporation where are they at - where is their money? Why did they pull out?
Gemini Master Fund LTD seems not to have been paid off - $2,092,064.92 as of September 24, 2010
ATN Enterprises LLC. has had SEC problems and AXTG used them too.
I am not saying anyone is gulity of anything, but time always seems to tell if they are or not. I just see a lot of unanswered questions. Where is Hirschbach and Erickson public statement on all of this?
Someone spent less than $100 to drive up the %
What hedge fund is going to loan money to these guys with all the SEC heat around them. I wonder if that is why the last one pulled out. With a history of little to no profit, and questionable financal backing in my opinion. Who is going to fund them???
"History of Greed: Financial Fraud from Tulip Mania to Bernie Madoff" is a book by By David E. Y. Sarna, Andrew Malik.
In it they talk about ATN Enterprises LLC. who AXTG used in 2006 & 2007
http://www.marketwire.com/press-release/Wall-Street-News-Alert-Breaking-News-Alert-AXTG-September-24-2007-1251800.htm
"In 2007, WSCF was previously compensated Four Thousand for coverage of Axis Technologies, Inc (PINKSHEETS: AXTG), by a third party (ATN Enterprises LLC), who is non-affiliated and may hold a significant position in the stock, for services provided including dissemination of company information in this release. In 2006 WSCF was compensated a total of Seventy Two Thousand Dollars for coverage of Axis Technologies, Inc (PINKSHEETS: AXTG), by a third party (ATN Enterprises LLC), who is non-affiliated and may hold a significant position in the stock."
In 2006, James Erickson and Kipton Hirschbach, President and CEO respectively of the privately-held corporation Axis Technologies, Inc., sought financing to expand the company’s operations. They were referred to Luna to help raise capital.
http://www.sec.gov/litigation/complaints/2010/comp21779.pdf
Luna identified Riverside Entertainment as a non-reporting company whose shares were quoted on the Pink Sheets. He advised Erickson and Hirschbach that Axis Technologies, Inc. should engage in a reverse merger with Riverside Entertainment and issue and sell shares in the newly-named public company to accredited investors. Erickson and Hirschbach agreed. Luna drafted and faxed to them the Share Exchange and Acquisition Agreement and other necessary paperwork for the reverse merger.
22. On September 21, 2006, Luna signed and emailed to Hirschbach a “Term Sheet for Equity Financing” on the letterhead of his company Taurus Capital Corporation that stated, in part:
Axis will be acquired by a public company, RIVERSIDE ENTERTAINMENT, INC. (“RVEN”), a Delaware corporation, with its common stock traded on the National Quotation Bureau Pinksheets, on a solicited basis with the trading symbol: RVEN. This acquisition shall occur concurrently with the investment of USD $300,000.00 into AXIS by an investment group for approximately 25% of AXIS. RVEN proposes offering to certain subscribers who qualify as “Accredited Investors” as that term is defined in Rule 501 of Regulation D of the Securities Act of 1933, as amended… based upon an exemption from registration found in Rule 504 of Regulation D of the Securities Act.
I currently have confirmed funds available for the initial investment of $300,000.00 from the exempt subscribers and expect to have authorization from RVEN management to enter into the agreement today.
(Emphasis added)
23. Erickson and Hirschbach signed and faxed the Share Exchange and Acquisition Agreement back to Luna. Thereafter, the entity formerly known as Riverside Entertainment engaged in a 1-for-1000 reverse stock split and changed its name to Axis Technologies Group, Inc., so that Riverside Entertainment shareholders received 1 share of Axis common stock for every 1,000 shares of Riverside Entertainment common stock they held.
24. Luna then drafted an agreement pursuant to which the newly-created Axis Technologies Group, Inc. acquired the privately-held company called Axis Technologies, Inc., in
6
Case 2:10-cv-02166 Document 1 Filed 12/14/10 Page 6 of 17
exchange for the common stock of the public company Axis Technologies Group, Inc. Erickson and Hirschbach became the President and CEO of Axis Technologies Group, Inc. (hereinafter “Axis Group”).
25. On October 24, 2006, Luna mailed a letter to Axis Group identifying the four purported accredited investors – St. Paul VF, Minnesota VC, Real Estate MN and Matrix VC – which agreed to execute subscription agreements and purchase a total of 15,000,000 shares of Axis Group stock for $300,000. Luna paid for the shares from an account in the name of his law firm, Luna & Vining APC.
26. Erickson relied on Luna to confirm that the entities that Luna presented to Axis Group were accredited investors under the law. Luna was the sole intermediary between Axis Group and his claimed accredited investors; he communicated the sales price to the other accredited investors and prepared the subscription agreements for the purchase of Axis Group stock by the alleged accredited investors.
B. Luna’s accredited investors were shams
The Commission's complaint alleges that:
* Luna drafted and issued a legal opinion letter to a transfer agent that falsely stated the shares of Axis were unrestricted because they were issued pursuant to a valid exemption from registration under Rule 504 of Regulation D.
* Luna further misrepresented that St. Paul VF, Minnesota VC, Real Estate MN and Matrix VC were accredited investors in Minnesota, and claimed that Minnesota state law permitted an exemption allowing accredited investors to purchase unrestricted shares from Axis.
* These entities were not accredited investors, and moreover were simply conduits for distribution of the stock to the public. Soon after these alleged accredited investors received their shares, they transferred shares to promoters and sold the remaining shares to the public.
* Luna, Montgomery, Daskivich and Murtha received profits totaling $6.88 million from St. Paul VF, Minnesota VC, Real Estate MN and Matrix VC sales of their shares of Axis stock.
The Commission's complaint alleges that Luna violated the antifraud provisions of Section 17(a) of the Securities Act of 1933 (Securities Act) and Section 10(b) of the Securities Exchange Act of 1934 (Exchange Act), and Rule 10b-5 thereunder, and Luna, Montgomery, Daskivich, Murtha and their entities violated the registration provisions of Sections 5(a) and 5(c) of the Securities Act.
The Commission's complaint seeks from Montgomery, Daskivich, Murtha, St. Paul VF, Minnesota VC, Real Estate MN and Matrix VC: (1) a permanent injunction; (2) disgorgement of profits, including prejudgment interest; (3) a civil penalty; and (4) a penny stock bar. In addition, as to Luna, it seeks an order prohibiting Luna from providing professional legal services to any person in connection with the offer or sale of securities pursuant to, or claiming, an exemption under Regulation D, including, without limitation, participating in the preparation or issuance of any opinion letter related to such offerings. [SEC v. Marcus Luna, Nathan Montgomery, Adam Daskivich, David Murtha, St. Paul Venture Fund LLC, Minnesota Venture Capital, Inc., Real Estate of Minnesota, Inc., Matrix Venture Capital, Inc., Civil Case No.10-CV-02166, USDC NV] (LR-21779)
SEC accuses Henderson men of defrauding investors
http://www.lasvegassun.com/news/2010/dec/15/sec-accuses-henderson-men-defrauding-investors/
“Luna orchestrated a scheme in which he and the other defendants violated the registration provisions of the federal securities laws. In doing so, he and the other defendants received ill-gotten gains totaling approximately $6.88 million from November 2006 to December 2007. In furtherance of his scheme, Luna violated the antifraud provisions of the federal securities laws,” the SEC charged in its lawsuit.
The SEC said the alleged scheme involved Luna coordinating a “reverse merger” between privately-held Axis Technologies Inc. and a company whose shares were publicly traded on the penny stock market. He then arranged for a reverse stock split, the SEC said.
Debt is all you are buying, you have a better chance of hitting water, gold or oil, if you bury your money in the backyard.
AXTG can still lose you 3 cents yet, it is still not dead.
Rule 12g-4(a)(1) Filed 11/23/2010 more information.
Termination of registration of a class of securities under section 12(g) of the Act shall take effect 90 days, or such shorter period as the Commission may determine, after the issuer certifies to the Commission on Form 15 (17 CFR 249.323) that the class of securities is held of record by: Less than 300 persons
Termination of Registration of a Class of Security under Section 12(g) (15-12G) 11-23-2010
Section 12(g) of the Securities Exchange Act concerns exceptions to the normal filing requirements for registering a security with the SEC
4.5 months and still no financing. Poor sales and now weak financing options doesn't look to good for this one in my opinion.
The numbers never added up! There was no DD, just greed and hope in my opinion. Less than a million in sales per year = business should of been run out of a garage / basement. You have to learn to walk as a business before you can run.
Look at the history of the post on this board! Most where betting their whole life, legs, and other things, that this was the 2nd coming. I wonder if that leg has any feelings now - Lol.
When was the last time you where invited to a shareholder meeting?
Gemini Convertible Note is collateralized by security interests in the Company’s assets, including, without limitation, the Company’s intellectual property, machinery, equipment, and accounts.
Looks like there will be nothing left since they can't make the payments in my opinion.
Notice that the whole thing is out dated. They talk about July, what about today? In 3 months time most companies would of taken care of the problems.
Looks more hopeless that ever in my opinion.
Where are the sales that management said they had at???
Where is the UL listing at???
Where is the purchase orders worth over $500,000 at?????
Where is that Zero Debt now???
"Why do you keep bringing up debt?
Are you so negative on the investment deal that you refuse to read the 8K? Do you not understand that there will be ZERO DEBT when the deal closes this month?"
DHAB has defaulted under the Note by failing to pay said sum on or before the stated maturity date.
On September 20 th Axis was informed by Gemini Strategies, LLC ("Gemini") that the company was in default of the Note of the Security Agreement dated April 25, 2010, by, amongst other things, failing to make full payment thereunder by July 1, 2010. The failure to pay principal and interest by that date constitutes an Event of Default under the Note. An Event of Default under the Note constitutes an event of default under the security agreement. The balance due under the Note was $2,092,064.92 as of September 24, 2010. On October 13, 2010, Axis received a Notification of Disposition of Collateral.
Remember when...
Excerpt from the Axis Technologies Group, Inc. Business Plan:
Projected Revenues
Year Ended December 31, 2007 $12,900,000
Year Ended December 31, 2008 $25,800,000
Year Ended December 31, 2009 $42,570,000
"Recent developments with large retailers as well as government contractors make us quite confident we will reach our sales goals as projected in our business plan" said Kip Hirschbach
Reality doesn't seem to match the above numbers.
Where is all the insider buying? I would think that if this was a real deal, someone would be picking up cans from the road side, having a paper route or something, to make more money so they could buy more shares.
The company on ebay still has more than 10 ballast for sale, and from his history he hasn't sold any in the last 90 days.
@147,000 avg. volume last 5 trading days
@1255 avg. volume the 5 trading days before
price drop from @8 cents to @2.5 cents
over 4.5 times the ave 3 month volume
The ballast idea that was to sell itself seems to have run into reality.
What are the patents worth today? New 52 week low!
I have said that for years!
Interest and late fee's keeps adding up on the loans, while the clock keeps ticking, leaving shareholders with less and less in my opinion. I don't see how this is a positive.
"Effective upon the full execution of the JV Agreement, the Maturity Date under the Note is hereby amended to be July 1, 2010, provided that upon any Axis Entity directly or indirectly receiving any funding as contemplated in the JV Agreement (other than the purchase order financing to be provided by IRC thereunder), the Note shall be repaid with the proceeds from such financing."
I wonder if next month this gets changed to Aug 1 2010. If this was a government sale it could be 6 months or more before the funds are issued. "6-22-2010 I posted this"
Now it is 10-1-2010 and still nothing new seems to have happen. Shall we try for Nov 1 2010 ????.
5 cents new 52 week low is being shown by yahoo and pinksheets! Still 6 cents here.