SEC Charges Two with Defrauding Brokers to Manipulate Penny Stocks

On July 21, 2009 the SEC filed an emergency enforcement action against Eric Todd Seiden to halt an ongoing scheme in which Seiden fraudulently induced at least fifteen broker-dealers to buy over $1.8 million worth of thinly traded stock. On August 14, 2009, the Commission amended its complaint and added Kamal Abdallah as a second defendant.

The Commission's amended complaint, filed in the Eastern District of New York, alleges that on numerous occasions, Seiden, a former securities professional, telephoned broker-dealers, falsely identified himself as a customer or customer representative, and placed large orders to purchase a thinly traded stock for the customer's account. In many instances, Seiden's false representation caused the broker-dealers to execute the orders, which resulted in purchases totaling more than $1.8 million.

The amended complaint also alleges that Abdallah conspired with Seiden to manipulate the prices of penny stocks. Abdallah, the former CEO of Universal Property Development & Acquisition Corp. ("UPDV"), paid Seiden to create artificial demand for UPDV stock and inflate its stock price. Seiden and Abdallah worked in concert to manipulate the market price of UPDV stock, enabling Abdallah to dump his UPDV stock in the public market at an inflated price.

The Complaint charges Seiden with violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and Abdallah with violating Section 17(a) of the Securities Act of 1933, and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder.

On July 21, 2009, the Court issued a temporary restraining order. On July 30, 2009, the Court issued a preliminary injunction which, among other things, prohibits Seiden from further violations of the federal securities laws. The Commission seeks a final judgment enjoining Seiden and Abdallah from committing future violations of the foregoing federal securities laws and ordering them to disgorge ill-gotten gains plus prejudgment interest thereon and assessing civil penalties. The Commission also seeks a final judgment prohibiting Seiden and Abdallah from participating in any offering of penny stock and barring Abdallah from serving as an officer or director of a public company.