this the same VFIN? vFinance et al. v. Freestar et al. (Civil Action).
On or about January 22, 2003, vFinance Investments, Richard Rosenblum, David Stefansky, Marc Siegel, Boat Basin Investors LLC, and Papell Holdings, Ltd. (collectively, "Plaintiffs") filed a complaint against Paul Egan, First American Stock Transfer and Phil Young, president of First American Stock Transfer, in the United States District Court for the Southern District of New York alleging, among other claims, fraud, conversion and violations of the Securities Exchange Act of 1934. In addition to unspecified money damages, the Plaintiffs sought an affirmative preliminary injunction against Mr. Egan and First American Stock Transfer seeking the removal of restrictive legends placed on 14,400,000 unregistered shares of Registrant stock purportedly owned by the Plaintiffs. The Registrant was not named in the suit. The Registrant opposed the affirmative injunctive action on the grounds that removal of the legends would constitute a violation of the registration provisions of the federal securities laws and that the Registrant was an indispensable party.
On January 29, 2003, U.S. District Judge Robert Sweet held a hearing on the Plaintiffs' request for preliminary injunction and expressed serious concern that there seemed to be significant factual disputes and refused to order the injunction.
On February 7, 2003, Judge Sweet issued an order denying the Plaintiffs' motion for preliminary injunction and staying the action pursuant to U.S. Bankruptcy Code 11 U.S.C. 362(a), on the ground that the Registrant, which was not named in the action, was an indispensable party. That stay continued until after the bankruptcy case (discussed above) was dismissed and the Registrant was added as a defendant.
On March 24, 2003, the Plaintiffs filed an amended complaint against the Registrant, Paul Egan, Ciaran Egan, and Registrant's stock transfer agent alleging, among other things, that Registrant and Paul Egan failed to repay money borrowed. Plaintiffs' 13 causes of action include breach of contract, conversion fraud and violations of the Securities and Exchange Act of 1934. The amended complaint seeks the issuance of 14,400,000 shares of free trading Registrant stock and damages in an unspecified amount.
On May 5, 2003, the Registrant filed a counterclaim against the Plaintiffs and vFinance Investments, Inc. On that same date, the Registrant answered Plaintiffs' complaint, denying the allegations. The Registrant's counterclaim contends that the Plaintiffs and vFinance breached their fiduciary duties to the Registrant by recommending and assisting the Registrant in negotiating and drafting convertible debt financing through floorless convertible notes with lenders controlled by vFinance. The Registrant further alleges that the Plaintiffs and vFinance charged the Registrant exorbitant fees and otherwise ensured profits of multiples of their original investment by setting out to destroy the Registrant through short selling its stock. The Registrant and Paul Egan further allege that vFinance and the Plaintiffs caused them to suffer damages as a result of their "death spiral" or toxic convertible financing strategy, violations of the federal securities laws, breach of
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contracts, including over-conversion of certain pledged securities, market manipulation, breach of fiduciary duty and fraud.
As part of the counter-claim, the Registrant alleges that the Plaintiffs may have caused the Registrant unwittingly to participate in violations of the registration provisions of the federal securities laws in connection with certain previously disclosed financing transactions involving convertible notes.
As of March 4, 2004, this case has been settled. Under the terms of the settlement agreement: (i) Plaintiffs, David Stefansky, Richard Rosenblum, Marc Siegel, Boat Basin Investors LCC, and Papell Holdings Ltd. agreed to return 15,399,000 shares (990,000 shares originally issued by the Company as collateral and 14,400,000 given by Mr. Paul Egan) of the Registrant's stock issued to them; and (ii) Plaintiffs and vFinance agreed to refrain from trading in the Registrant's securities for a period of two years. On or about March 19, 2004, the parties filed a stipulation of dismissal of the case with prejudice. The parties also exchanged full mutual releases of all claims, cross-claims and counterclaims with prejudice. There are no remaining contingent liabilities related to that lawsuit
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