KIT Digital, Inc fka KITDQ

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KITDQ: Courtesy Scion: Former Kit Digital executives arrested on U.S. fraud charges

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NEW YORK | By Nate Raymond
Tue Sep 8, 2015 6:58pm EDT
http://uk.reuters.com/article/2015/09/08/kit-digital-arrests-idUKL1N11E2OT20150908

U.S. prosecutors announced charges on Tuesday against the former chief executive and chief financial officer of Kit Digital Inc for a scheme to deceive investors and regulators about the video technology provider's financial health.

Kaleil Isaza Tuzman, the former CEO, was arrested on Monday in Colombia on charges including securities and wire fraud contained in an indictment filed in federal court in Manhattan.

Robin Smyth, Kit Digital's former CFO, was arrested on Tuesday on charges including securities fraud, Manhattan U.S. Attorney Preet Bharara said in a statement.

Tuzman's lawyer had no immediate comment. A lawyer for Smyth, 61, could not immediately be identified.

Prosecutors said that from 2008 to 2011, Tuzman, 43, oversaw a scheme with a hedge fund manager to manipulate Kit Digital's stock in order to artificially inflate its share price and trading volume. The hedge fund manager was not identified.

Prosecutors said Tuzman personally invested in the fund and arranged to have Kit Digital invest $1.15 million in it, turning the hedge fund into a vehicle by which the company invested in itself without disclosing that fact to shareholders.

Tuzman, working with Smyth, meanwhile from 2010 to 2012 sought to deceive Kit Digital's investors and auditors into believing the company was more profitable than it was in reality, prosecutors said.

That scheme involved the improper recognition of revenue for "perpetual license" contracts for software and the execution of fraudulent round-trip transactions, prosecutors said.

Bharara's statement said the scheme's aim was to "mislead investors and regulators about the financial health of the publicly traded company they oversaw."

After Tuzman and Smyth resigned in 2012, the company that November announced it would restate financial results going back to 2009.

On the first trading day after the announcement, Kit Digital's shares opened down 52 percent at $1 per share and fell a further 26 percent to $0.74 by the day's end, the U.S. Securities and Exchange Commission said in a related civil lawsuit.

NASDAQ subsequently delisted Kit Digital, which ultimately filed for bankruptcy in April 2013.

The case is U.S. v. Tuzman, U.S. District Court, Southern District of New York, No. 15-cr-536.

http://uk.reuters.com/article/2015/09/08/kit-digital-arrests-idUKL1N11E2OT20150908