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A. Subject Matter Jurisdiction and Venue
1. This Verified Complaint brought on by adversary proceeding arises in and relates to Bankruptcy Case No. 8:07-12347-TA which was commenced by the filing of an involuntary Chapter 7 petition on August 1, 2007 by Defendant, YA Global Investments, L. P. (“YAGI”) f/k/a Cornell Capital Partners, L P (“Cornell”), against Cobalis.
2. The Court has jurisdiction to adjudicate the issues raised in this adversary proceeding pursuant to 28 U.S.C. § 1334.
3. This action is a core proceeding under 28 U.S.C. § 157(b)(2)(A)(b)(C)(K) and (O).
4. Venue in this judicial district is appropriate under 28 U.S.C. § 1409(a) and/or (c) because Debtor’s bankruptcy case is pending in this Court.
5. YAGI, on January 28, 2008 field a proof of claim in this case in the amount of $3,000,000 designated as Claim No. 6.
1. On or about August 1, 2007, before the expiration of the time period to cure the default, YAGI filed the involuntary Chapter 7 Petition against Cobalis in this Court.
2. Upon information and belief, on several occasions YAGI converted a portion of the Debentures and immediately thereafter YAGI engaged in short selling shares of Cobalis which significantly drove the share price downward.
3. Upon information and belief, the following occurred:
a. From May 22 through June 4, 2007 (9 trading days), 2,948,700 shares were traded into the market which drove the stock price down from $1.01 to $0.47, a decline of 53%.
b. From July 5 to July 11, 2007 (5 trading days), 2,924,500 of shares were traded into the market which drove the stock price down from $0.31 to $0.13 or 58%.
c. From July 20 to July 30, 2007 (7 trading days), 989,100 of shares were traded into the market which drove the stock price down from $0.17 to $0.14 or 18%.
4. Upon information and belief, the overall result of trading activities by YAGI and/or the short selling that occurred resulted in the decrease of the share price of Cobalis from $1.01 on May 22, 2007 to $0.11 on July 10, 2007. This amounted to a reduction in share price of approximately 90%.
5. Upon information and belief, at all times during these trades, YAGI knew the impact of its trading activities would result in the substantial decline of the share price of Cobalis’ stock.
6. This massive selling of Cobalis stock by YAGI prevented Cobalis’ ability to go to private and institutional investors to raise additional capital to satisfy its obligations to YAGI.
7. Cobalis, under the terms of the Debentures, had the right, at any time after the initial registration of YAGI’s free-trading shares in or about April 2007, to redeem same, partially or entirely, by tendering funds to YAGI plus a premium depending on the price of Cobalis’ stock at the time of payment.
8. Upon repayment of the Debentures, any and all pledged security would be returned to Cobalis or to other shareholders who pledged shares to YAGI.
