The U.S. Securities and Exchange Commission has revoked the registration of East Delta Resources Corp., the Montreal pink sheets listing that David and Mayer Amsel face civil charges for manipulating. In an administrative order filed on Feb. 17, 2010, the SEC says the company has failed to file annual and quarterly reports since Dec. 31, 2008.
The order revoking the company comes almost one month after SEC filed a civil complaint against the Amsels and a Montreal man, Victor Sun. It claimed that they manipulated East Delta from 25 cents to $1 and made $1.4-million dumping the stock. (All figures are in U.S. dollars.) So far there as been little progress in the case, as none of the men have filed an answer to the charges.
East Delta has not traded since Jan. 13, 2010, when the SEC halted the company. Prior to the suspension, East Delta was a thin trader, last closing at 1.85 cents on 33,400 shares.
SEC's complaint
The SEC's complaint, filed in the Eastern District of New York on Jan. 26, 2010, identified Mr. Sun as the chief executive officer of East Delta and the Amsels as purported consultants to the company. The Amsels are brothers, with older brother David Amsel living in Montreal and Mayer Amsel living in New York.
According to the complaint, the men manipulated East Delta between 2004 and 2007 with false news releases and manipulative trades. The news releases began in 2004, when the company started claiming that it had one million ounces of minable gold on its Bake property in China. Then, in 2006, the company claimed that it had purchased a producing gold mine called Huaqiao, and that the mine would generate revenue in 90 days.
The company's price and volume rose around the times that the news releases went out. For example, a Feb. 8, 2006, news release announced an inferred resource of 300,000 ounces of gold at Huaqiao. The day it went out, the stock rose from 90 cents to $1.18 and the company's volume increased from 341,905 shares to 2,847,465 shares. On that day, the Amsels sold 90,500 shares for gross proceeds of $93,000, the complaint stated.
The SEC said David Amsel and Mr. Sun knew the claims in the news releases were false. They prepared and signed East Delta's Form 10-K for the nine months ended Dec. 31, 2005, which stated that the company had not yet confirmed the amount of gold at Huaqiao or if it could mine the gold economically. In addition, the company's deal to acquire the mine was in doubt. The SEC said the company expensed a $150,000 deposit it had paid for the mine, and in doing so it cited the uncertainty of closing the deal.
As the company was issuing these misleading news releases, the men carried out a series of wash trades, according to the complaint. Prior to issuing the news, the men had deposited one million shares in accounts they controlled at Canaccord Capital Corp., Golden Capital Corp. and New York-based Kensington Capital Corp. As the company started issuing news, they started trading between their accounts, the SEC said. On some days, accounts controlled by Mayer Amsel were the only ones trading the stock, the complaint stated.
Between February, 2004, and June, 2006, the Amsels sold at least three million shares into the manipulated market, the SEC claimed. They grossed at least $800,000 from the sales. During the same period, Mr. Sun and his family sold at least $600,000 worth of East Delta shares, according to the SEC.
The complaint also alleged that the men hired third parties to buy East Delta shares, further contributing to the false impression that there was an active and liquid market for the company. This included hiring an "investor relations consultant" to buy or find buyers for up to one million shares.
The SEC sought appropriate civil penalties, disgorgement of profits and orders barring Mr. Sun and the Amsels from participating in penny stock offerings. In filing the case, the SEC acknowledged the assistance of the B.C. Securities Commission.
The East Delta case is not the first time that regulators have targeted Mayer Amsel. In June, 1995, the National Association of Securities Dealers (now FINRA) fined him $100,000 and banned him from associating with any NASD member after he used client accounts to enrich a family account. The regulator said he bought shares in various companies using client accounts, and then sold those shares to a family account below market value. The scheme netted him $550,000 in illicit profits.
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