Securities Law Prof Blog

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

Thursday, September 3, 2009

SEC Charges 6 Defendants with Unregistered Distribution of 21 Billion Shares

On September 1, 2009, the SEC filed a civil complaint against three individuals and three entities alleging that between February 2004 and June 2007, they engaged in an unregistered distribution and sale of over 21 billion shares of Universal Express Inc. (USXP) formerly located in New York City, New York. The defendants raised approximately $34 million from their sales to public investors. The defendants are Doyle Scott Elliott of Holmes Beach, Florida, Scott Elliott Inc. of Bradenton Beach, Florida, Robert Weidenbaum of Coral Gables, Florida, CLX Associates, Inc. of Miami, Florida, and Michael Xirinachs and Emerald Asset Advisors LLC of Melville and Dix Hills, New York respectively.

The complaint alleges that Elliott and Xirinachs entered into private agreements to obtain shares of Universal Express for themselves or their respective companies, Scott Elliott Inc. and Emerald Assets Advisors, at a substantial discount to the current market price. Xirinachs also served as an investment adviser to an offshore entity, North Atlantic Resources Ltd., and obtained shares of Universal Express at a substantial discount for that entity. Weidenbaum entered into an arrangement for CLX to be paid in shares of Universal Express stock purportedly for consulting services. However, each of the defendants immediately sold the shares they had obtained directly from Universal Express without filing a registration statement providing information about their distribution of the shares to public investors. The complaint alleges the defendants’ unregistered distribution of shares to the public and failure to provide accurate information about the company, which is required in a registration statement, created a substantial risk of loss to investors.
The defendants are charged with violating the securities registration provisions of Sections 5(a) and (c) of the Securities Act of 1933. The Commission seeks permanent injunctions against all defendants, disgorgement of ill-gotten gains, and civil penalties. The Commission also seeks penny stock bars against all defendants. The Commission previously sued Universal Express, Inc. for violating the securities registration provisions. See SEC v. Universal Express, Inc. et al, 04 Civ-02322 (GEL), (LR-18636 Mar. 24, 2004).

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