U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 23850 /June 1, 2017
Securities and Exchange Commission v. Adesh Kumar Tyagi, No. 3:17-cv-03128 (N.D. Cal. filed May 31, 2017)
SEC Charges Former CEO of Penny Stock Company Systems America, Inc. with Fraud
The Securities and Exchange Commission has filed fraud charges against Adesh Kumar Tyagi, the former CEO, sole director, and majority shareholder of Systems America, Inc., subsequently renamed Cloudeeva, Inc.
The SEC’s complaint, filed in the U.S. District Court for the Northern District of California on May 31, 2017, alleges that Tyagi falsely claimed in press releases he issued between July 2010 and September 2011 that the company had hundreds of customers and supported customer operations in nearly 20 countries when, in fact, the company had only two main clients in 2010 and did not support operations in any foreign countries in 2010 and 2011. Tyagi also allegedly falsely claimed in an Initial Disclosure he published on behalf of Systems American on July 2, 2010 that he was not a party to any material litigation. In Annual Reports he published on behalf of Systems America on February 24, 2011 and July 24, 2012, Tyagi claimed that no officer or director of the company had been named as a defendant in a criminal proceeding, when he had been named as a defendant in two pending criminal proceedings at the time of each publication. The complaint also alleges that Tyagi placed buy limit orders in small increments during individual trading days and marked the close on at least 16 trade dates in order to artificially inflate the share price and trading volume of the company’s securities. Finally, the complaint alleges that Tyagi failed to file with the SEC required disclosures of his holdings and transactions in company securities.
The SEC’s complaint charges Tyagi with violating Section 17(a) of the Securities Act of 1933 and Sections 10(b), 13(d), and 16(a) of the Securities Exchange Act of 1934 and Exchange Act Rules 10b-5, 13d-1, and 16a-3, and seeks to hold Tyagi secondarily liable as a control person under Section 20(a) of the Exchange Act and as an aider and abettor under Exchange Act Section 20(e) for the company’s violations of Exchange Act Section 10(b) and Rule 10b-5(b). The complaint seeks permanent injunctions, an injunction prohibiting Tyagi from participating in transactions of any security of an entity of which he is an officer, director, owner, significant shareholder, or control person, disgorgement of ill-gotten gains plus prejudgment interest, penalties, and officer-and-director and penny stock bars.
On November 9, 2016, Tyagi pleaded guilty to certain of the misconduct at issue in the SEC’s complaint in a parallel criminal matter in the U.S. District Court for the Central District of California to one count of securities fraud. The SEC’s investigation is continuing.
https://www.sec.gov/litigation/litreleases/2017/lr23850.htm