Globalstar Inc (GSAT)

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More bad news for Magna

http://investorshub.advfn.com/boards/read_msg.aspx?message_id=121827142

Quote:
April 9, 2016

By Electronic Mail

Daniel Scott Furst
Sichenzia Ross Friedman Ference LLP
61 Broadway
New York, New York 10006

Re: Pre-Suit Demand Upon the Board of Directors of AMBS

Dear Mr. Furst:

I write on behalf of Jeanne Friedman, a shareholder of Amarantus Bioscience (“AMBS”). This letter is directed to Sichenzia Ross Friedman Ference LLP (“Sichenzia”) in its capacity as corporate counsel to AMBS. It is noted that I have received no response to my March 28, 2016 letter inquiring as to Sichenzia’s apparent conflict of interest in its representation of AMBS.

Ms. Friedman has become aware of the March 2015 Bloomberg article, which refers to Yossef Kahlon as a having taught Magna founder Josh Sason the penny stock business:

Around 2009, Kahlon heard the Sasons were having financial issues. He told the elder Sason he could help. “I said, ‘Bring your son here, I’ll teach him to make money,’?” says Kahlon, who by then was in the penny-stock business.

The market for penny stocks can be traced back to the scrum of brokers who used to trade shares that weren’t welcome on the New York Stock Exchange. A 1920 article in Munsey’s magazine called them “a close-packed mass of creatures apparently human” and described the auctioning of shares in a puppy.

Penny stocks exist so that, say, an oil wildcatter with a hunch he’s about to drill a gusher can raise the money he needs without the hassle of listing on an exchange. They feed a desire for a hot tip that could double or triple. It’s a disreputable corner of the market. Many listings are bogus. Most are, at best, just a guy with an idea, and often that idea is to raise some money so he can pay himself a fat salary. Other listings are real businesses that have been dropped from the big exchanges because they’re on the verge of failure.

Kahlon paid brokers to scour the market for penny stocks with high trading volume, then call the companies to see if they wanted to issue new stock. These struggling companies can’t sell new shares to the public the usual way, by enlisting a proper investment bank, because it’s too expensive and the offerings too tiny. But they can sell to private investors such as Kahlon. They gave him steep discounts, and he’d sell the shares into the public market right away, often doubling his money as everyone else’s shares were diluted. There are laws against doing this, but Kahlon thought he spotted an exception in Texas. He incorporated his company there, while operating from New York.

Kahlon says he showed Sason how to trade like him—and then cut off contact so that no one could accuse them of conspiring. “I’ll teach you the business, but the minute you open, we can’t talk anymore,” he said to Sason. “I don’t have any friends in this business.” Texas corporate records show Sason incorporated Magna Group in the state in 2010, using the same mail drop as Kahlon.

As Sichenzia is no doubt aware, Mr. Kahlon has been sued by the SEC for practicing the business model that he taught to Mr. Sason. A copy of the SEC’s complaint is attached as Exhibit A, demonstrating that Mr. Sason’s penny stock business is substantially identical to the scheme orchestrated by Mr. Sason’s mentor. Also attached, as Exhibit B, is the SEC’s summary judgment brief on the issue of liability; and Exhibit C is the Court’s order granting SEC’s motion for summary judgment as to liability. As set forth in Exhibit D, the SEC is currently seeking nearly $10 million in disgorgement, penalties, and interest from Mr. Kahlon. Additionally, the SEC is seeking to bar Mr. Kahlon from being involved in penny stocks.

Ms. Friedman understands that AMBS is, and has been, party to numerous contracts with Magna and/or its affiliates. Ms. Friedman has reason to believe that these agreements played an instrumental role in the rampant destruction of AMBS shareholder value. Simply put, based on the facts and circumstances, it appears that Magna’s dealings with AMBS were part of a larger scheme to violate federal securities laws.

In the event it is proved that Magna has engaged in a scheme to violate securities laws involving AMBS, it would implicate 15 U.S.C. § 78cc:

Every contract made in violation of any provision of this chapter or of any rule or regulation thereunder, and every contract (including any contract for listing a security on an exchange) heretofore or hereafter made, the performance of which involves the violation of, or the continuance of any relationship or practice in violation of, any provision of this chapter or any rule or regulation thereunder, shall be void (1) as regards the rights of any person who, in violation of any such provision, rule, or regulation, shall have made or engaged in the performance of any such contract, and (2) as regards the rights of any person who, not being a party to such contract, shall have acquired any right thereunder with actual knowledge of the facts by reason of which the making or performance of such contract was in violation of any such provision, rule, or regulation....

This means that AMBS may have a right to cancel its executory contracts with Magna or its affiliates. Moreover, as you know, AMBS’s shareholders have suffered catastrophic losses in equity value during the time that Magna has been involved with AMBS. Given that Magna and other underwriters have profited greatly from the unlawful scheme that Mr. Kahlon taught to Mr. Sason, AMBS may have a cause of action against Magna for fraud, breach of fiduciary duty, and unjust enrichment.

Please be advised that pursuant to Rule 23.1 of the Nevada Rules of Civil Procedure, Ms. Friedman hereby makes the following pre-suit demand upon the Board of Directors of AMBS. In particular, demand is made that:

1) The board of directors shall appoint a special committee (the “Special Committee”), consisting of independent directors, which shall be responsible for determining, with the assistance of qualified independent counsel, whether its current corporate counsel, Sichenzia, is ethically permitted to advise AMBS with respect to its potential claims against Magna, whose principals are also represented by Sichenzia. The Special Committee shall also determine whether Sichenzia has heretofore properly advised AMBS of its full legal options with respect to its dealings with Magna and other lenders / underwriters, and shall determine whether it is in the best interest of AMBS to continue being represented by Sichenzia.

2) The Special Committee shall determine whether Magna has violated any state or Federal securities law in connection with its transactions with AMBS.

3) The Special Committee shall engage qualified independent litigation counsel to prepare a lawsuit on behalf of AMBS against Magna and/or its affiliates and any other lender who has participated in unlawful underwriting of AMBS stock for the purpose of (a) voiding any executory contracts; (b) obtaining a damages award on behalf of the company; and (c) pursuing legal malpractice claims against Sichenzia.

4) The Special Committee shall report any evidence of securities violations to the U.S. Securities and Exchange Commission.

Ms. Friedman requests that the Board of Directors of AMBS respond to this pre-suit demand no later than April 29, 2016. The Board of Directors is hereby on notice that AMBS’s remedies may be subject to a statute of limitations, and therefore if AMBS’s board delays further in obtaining independent legal advice regarding its rights and remedies as against Magna and other underwriters, AMBS may lose its legal rights with the passage of time.

Very truly yours,

/s/

John H. Snyder

cc: Greg Sichenzia, Esq. ([e-mail])
Marc J. Ross, Esq. ([e-mail])
Richard A. Friedman, Esq. ([e-mail])
Michael H. Ference ([e-mail])
Jeffrey Fessler ([e-mail])

John H. Snyder PLLC | 555 Fifth Avenue, Suite 1700 | New York, NY 10017
Tel: [phone] | Cell: [phone] | Web: www.jhs.nyc


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