Select American Transfer Company

[Bruce A Thompson]

SEC seeks summary judgment against Jason Wong

2011-03-04 14:56 ET - Street Wire

by Mike Caswell, StockWatch.com

The U.S. Securities and Exchange Commission has filed a motion for a summary judgment against Jason Wong, the Ontario man facing civil fraud charges for his role in a pink sheets hijacking scheme. The regulator claims that he and others improperly took over 43 inactive public companies and sold them as shells. The evidence against Mr. Wong is so overwhelming that there is no need for a trial, according to the motion.

The SEC initially charged Mr. Wong and others with the hijacking scheme in September, 2009. It said that they took control of inactive public companies by filing false paperwork with the Cusip Bureau and with multiple secretaries of state. They then sold the companies to various buyers. One of the companies went on to become Toronto Stock Exchange listing Paramount Gold and Silver Corp., and another became Surrey-based pink sheets listing World Hockey Association Corp. (The SEC did not accuse either company of any wrongdoing.)

Motion for summary judgment

The SEC filed its motion for a summary judgment against Mr. Wong on Feb. 25, 2011, in the Southern District of New York. In it, the regulator claims to have evidence from more than a dozen witnesses, banks, phone companies and other regulatory agencies that shows Mr. Wong played a substantial role in the scheme. Moreover, two of his co-defendants have admitted to the allegations in the complaint, and both implicated Mr. Wong, the motion states.

The mechanics of the fraud, as described by the motion, were fairly simple. Mr. Wong and his long-time friend, Irwin Boock, sought out public shells that had gone dormant. Using false paperwork and bogus corporate resolutions, they obtained a new Cusip number and a new trading symbol for each company, as well as control over its shares. Then they sold the shells to clients, usually people looking to raise money in the market, the motion states. In some cases, they participated in promoting the stocks, and sold shares of the companies on the market.

According to the SEC, Mr. Wong participated in the scheme with full knowledge that the companies were hijacked. The evidence against him includes several e-mails between him and his co-defendants, in which they discussed the day-to-day issues they faced in taking over and selling the shells. One, dated Sept. 19, 2004, came after they received a complaint from the real president of one of the hijacked companies. The e-mail instructed Mr. Wong to threaten the president with legal action. Another e-mail instructed Mr. Wong to request $150,000 from an individual named J.F. Amyot as payment for a shell.

Other evidence cited in the motion came from government sources. This included testimony from Peter McNally, the manager of operations at Cusip Global Services. He told the SEC that Mr. Wong's name raised a red flag, because he or others connected to him sent an extraordinary number of Cusip requests.

Mr. Wong's activity also gained the attention of the Nasdaq, which processed name change requests for the hijacked companies. The exchange found it unusual that Mr. Wong's name appeared on requests as both the president of the public company and the president of the company's transfer agent, the SEC says.

Central to the scheme, as described by the SEC, was Mr. Wong's control over an Ontario transfer agent called Select American Transfer. The SEC says Select American Transfer served as the agent for many of the hijacked companies, and filed the necessary paperwork for name changes and share issuances. The firm's only employee, a 24-year-old student from Guyana, told the SEC that she simply did what Mr. Wong told her to do.

Mr. Wong's compensation for the scheme was largely with shares of the hijacked companies, the SEC says. Trading records indicated that he deposited stock for nine of the companies with an account at RBC Bank, and that he sold the shares almost immediately. The motion does not state how much money he made from the sales.

The SEC says the evidence against Mr. Wong is sufficient to prove that he committed securities fraud, and that there is no genuine issue for trial. It asks for a judgment against Mr. Wong, and that the judge determine appropriate disgorgement at a later date.

Wong says gains not ill-gotten

Mr. Wong, for his part, says the SEC is not entitled to any order requiring him to disgorge ill-gotten gains. In a motion for partial summary judgment filed on Feb. 25, 2011, he says that he simply sold stock that he either bought on the market or received for services. The only evidence against him, as he sees it, is that he received shares and later sold them, which proves nothing.

Mr. Wong also denies knowing about the hijackings. Between 2003 and 2007 (the time of the scheme), he performed consulting services, in which he "put different people in contact with each other," the motion reads. He then received shares in seven companies as payment for his work. "At the time Wong received stock payments ... he was unaware that the companies he received stock in had been 'hijacked' or were being 'hijacked' - as a result, Wong accepted the stock without issue," the motion states.

Moreover, he did not actually make any money on three of the companies that the SEC listed, he says. He claims that he suffered a $4,465 loss in trading those three stocks, so there are no gains that he could disgorge.

Mr. Wong contends that the SEC must do more than claim he participated in "some non-specific, grandiose scheme." He asks that the judge dismiss the claim for disgorgement against him.

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