Securities Law Prof Blog

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

Monday, July 14, 2008

SEC Charges Mobile Ready Entertainment with Artificially Inflating Stock Price

The SEC (Commission) filed a civil action in the United States District Court for the Northern District of Georgia against Mobile Ready Entertainment Corp. (Mobile Ready) and its former co-chief executive officers Michael H. Magolnick (Magolnick) and Craig A. Mora (Mora). The Commission alleges that, between January and July 2007, Magolnick and Mora, acting through Mobile Ready, created artificial demand for Mobile Ready stock through the issuance of false and misleading press releases that contained baseless revenue projections and identified contracts for future business that did not exist. These false and misleading press releases inflated the per share price and trading volume of Mobile Ready. The complaint alleges that Magolnick and Mora thereafter made additional false statements in efforts to obtain unfounded legal opinion letters supporting their sales of Mobile Ready shares, which were not freely tradable. As a result of their efforts to artificially inflate the market for Mobile Ready stock and their obtaining baseless legal opinions supporting their sales, Magolnick and Mora sold personal holdings of more than 2 million restricted shares each.

The Commission alleges that, by their misconduct, defendants violated Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and that Magolnick and Mora further violated Sections 5(a) and 5(c) of the Securities Act of 1933. The Commission seeks against the defendants permanent injunctive relief, and, with respect to Magolnick and Mora, an accounting, disgorgement of ill-gotten gains plus prejudgment interest, civil penalties, and penny-stock and officer-director bars.

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