Wednesday, March 18, 2009
Two Texas men, Darrel T. Uselton and Jack E. Uselton, who perpetrated a massive e-mail spam campaign to drive up the demand for low value stocks they owned, will pay nearly $4 million in penalties and fines and will no longer be able to trade penny stocks under an agreement reached with the Securities and Exchange Commission. According to the SEC initial complaint, the Useltons generated proceeds of more than $4 million by obtaining stock from at least 13 penny stock companies from May, 2005 through December, 2006 and then, according to the SEC, selling those shares into an artificially active, and often-times rising, market that they created through manipulative trading, spam e-mails, direct mailers, and internet-based promotional activities.
Darrel Uselton and Jack Uselton, without admitting or denying the allegations, settled the action by consenting to entry of a court order that: (i) permanently bars them from Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder; and (ii) prohibits them from participating in an offering of penny stock pursuant to Section 21(d)(6) of the Exchange Act.
In addition, Darrel Uselton consented to entry of a court order that orders him to pay disgorgement and prejudgment interest in the amount of $2,838,866.72, which will be deemed satisfied upon entry of an order requiring him to pay that amount in restitution to the State of Texas. It also requires him to pay a civil monetary penalty of $1 million.