SEC Litigation Release No. 22746
July 9, 2013
SEC v. Merkin
On July 1, 2013, a
District Judge for the Southern District of Florida, signed a final judgment
against defendant Stewart A. Merkin (“Merkin”) in a civil action originally
filed by the SEC on October 3, 2011. The Defendant is an attorney in
Miami, Florida.
The alleged
violations include Section 10(b) of the Securities Exchange Act of 1934 (the
“Exchange Act”) and Rule 10b-5 thereunder. The
Defendant wrote four attorney representation letters for posting on the website
of Pink Sheets LLC and its successor, Pink OTC Markets, Inc. Therein, he
disclaimed knowledge of any investigation into possible violations of the
securities laws by StratoComm or any of its officers or directors. However, the
SEC’s complaint also alleges that the Defendant was representing StratoComm and
several individuals in connection with the SEC’s investigation at the time.
Nevertheless, in order that StratoComm’s shares would continue to be quoted,
the SEC’s complaint alleges that Defendant falsely stated that to his knowledge
StratoComm was not under investigation.
On October 3, 2012,
the Court granted the Commission’s motion for summary judgment with respect to
liability, finding that the Defendant made false statements of material fact,
with scienter, in connection with the purchase or sale of securities.
Defendant subsequently consented to the entry of a final judgment that: (i)
orders him liable to pay a total of $125,000 in disgorgement, prejudgment
interest and a civil penalty; (ii) imposes a permanent injunction against
future violations of Section 10(b) and Rule 10b-5 of the Exchange Act by making
false or misleading statements; and (iii) permanently bars Merkin from
participating in an offering of penny stock. In consenting to these remedies,
Merkin retained his right to appeal from the Court’s ruling on summary judgment
with respect to liability.
