Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

Monday, March 17, 2008

SEC Files Complaint in Alleged Stock Touting Scheme

The SEC filed a civil injunctive action in the United States District Court for the Middle District of Florida against two penny stock promoters, Robert M. Esposito and Gregory A. King; Anscott Industries, Inc., a microcap company headquartered in Wayne, New Jersey; and Jack R. Belluscio, Anscott's chairman and chief executive officer. The Commission charges that Esposito, King, Belluscio and Anscott participated in a fraudulent touting scheme of Anscott stock.  The complaint alleges that in April 2003, Esposito orchestrated a reverse merger between Anscott (then a private company) and Liquidix, Inc., a public shell company which, after the merger, changed its name to Anscott. According to the complaint, Belluscio, on behalf of Anscott, issued 4 million shares of Anscott stock to Esposito as compensation for arranging the reverse merger and for future stock promotion work. The complaint further alleges that Belluscio, on behalf of Anscott, filed a fraudulent Form S-8 registration statement with the Commission for the 4 million shares of Anscott issued to Esposito, which improperly enabled Esposito to sell these shares to the public during the fraudulent touting scheme.

As alleged in the complaint, after the reverse merger and the issuance of shares to Esposito, Esposito paid King, another penny stock promoter with whom Esposito had worked previously, to prepare and disseminate materially false and misleading tout sheets promoting Anscott stock. The Commission alleges that these tout sheets — crafted to appear like independent investment newsletters and entitled the Wall Street Bulletin — recommended Anscott as a "strong buy," and were disseminated to the public through fax spamming from late May 2003 through July 2003.

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