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U.S. SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 22260 / February 16, 2012

Securities and Exchange Commission v. CytoCore, Inc., et al, United States District Court for the Northern District of Illinois, Civil Action No. 1:11-cv-00246 (N.D. Ill., filed Jan. 13, 2011)

COURT ENTERS DEFAULT JUDGMENT AGAINST SEC DEFENDANT DANIEL J. BURNS AND ORDERS HIM TO PAY OVER $1.1 MILLION

The Commission announced that on January 31, 2012, an Illinois federal court entered a default judgment against Daniel J. Burns (“Burns”), a defendant in an action filed by the Commission in January 2011. The Commission alleged in its complaint that from 2003 to 2008, Burns, the former Chairman of the Board of Directors of CytoCore, Inc. (“CytoCore”), employed fraudulent schemes to profit from CytoCore stock transactions and received hundreds of thousands of dollars in improper compensation and benefits from CytoCore as an unregistered broker. According to the complaint, in February 2008, Burns caused CytoCore to issue a press release touting Burns’ investment in CytoCore stock, and then secretly sold shares immediately following the announcement. According to the complaint, Burns’ secret selling also constituted insider trading because Burns was in possession of material, nonpublic information about an ongoing CytoCore private stock offering.

The complaint further alleged that, from 2003 to 2008, Burns improperly received transaction-based compensation as an unregistered broker soliciting investors in CytoCore stock. The complaint also alleged that Burns submitted false claims for commissions purportedly earned by a friend for soliciting CytoCore investors, and his friend, in turn, remitted those commission payments to Burns. The Complaint also alleged that Burns submitted to CytoCore false claims for expense reimbursements relating to his investor solicitations. The complaint further alleged that Burns violated insider reporting requirements.

The Court’s final judgment enjoins Burns from future violations of Section 17(a) of the Securities Act of 1933, Sections 10(b), 14(a), 15(a), and 16(a) of the Securities Exchange Act of 1934 and Rules 10b-5, 14a-9, and 16a-3 thereunder, orders him to pay disgorgement in the amount of $804,100.00, plus prejudgment interest of $324,325.00, for a total amount of $1,128,425.00, and permanently bars him from acting as an officer or director of a public company.

For further information, please see Litigation Release Number 21811 (January 13, 2011).



http://www.sec.gov/litigation/litreleases/2012/lr22260.htm