U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 23839 / May 24, 2017
United States v. Gregg Jaclin, No. 3:17-cr-00281-CRB (N.D. Cal., filed May 18, 2017)
Securities and Exchange Commission v. Imran Husain, et al.,
Civil Action No. 2:16-cv-03250 (C.D. Cal., filed May 12, 2016)
A federal grand jury in San Francisco has indicted Gregg Jaclin, a New Jersey securities attorney, on charges relating to a scheme to manufacture public shell companies and sell them, including to some purchasers who used the shells for market manipulation schemes. The 8-count indictment, returned May 18, 2017, also charges Jaclin with obstruction of justice of two SEC investigations. Jaclin was charged in 2016 in a parallel SEC matter.
According to the indictment, Jaclin was an attorney specializing in penny stock companies. He worked with another individual-an undisclosed control person-to incorporate ten new companies, take them public, help get regulatory clearance to enable public trading of their stock, and sell them. Eight companies were sold for a total of approximately $2.25 million. Two companies were the subject of SEC enforcement actions before they could be sold. (see Stop Orders 33-9444 (Aug. 22, 2013) and 33-9577 (April 23, 2014)).
According to the indictment, for each company and with Jaclin’s knowledge or at his suggestion or direction, the control person hired a CEO and created a business plan to give the impression of a real company poised for growth. In fact, each CEO took all direction from the control person, and the true plan was to sell the company. Jaclin and those working at his direction, however, prepared numerous false and misleading documents that hid the control person and the actual business plan: registration statements to take the companies public; quarterly and annual reports; and attorney opinion letters. Jaclin also facilitated the sale of the shell companies by locating some of the purchasers and documenting all of the transactions.
The criminal case against Jaclin is based on much of the same conduct alleged in an amended SEC complaint, which was filed on November 22, 2016. The SEC’s complaint alleged that Jaclin and his co-defendant, undisclosed control person Imran Husain, engaged in a “shell factory” scheme to create and sell public companies at a profit. The SEC’s amended complaint charged: (i) Husain with violations of Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933 (“Securities Act”) and Section 10(b) of the Securities Exchange Act of 1934 (“Exchange Act”) and Rule 10b-5 thereunder, and, in the alternative, as a control person, Section 10(b) of the Exchange Act and Rule 10b-5 thereunder; (ii) Jaclin with violations of Sections 5(a), 5(c), and 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rules 10b-5(a) and (c) thereunder; (iii) Husain and Jaclin, in the alternative, with aiding and abetting violations of Section 5(a), 5(c), and 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder; and (iv) Husain and Jaclin with aiding and abetting violations of Section 15(d) of the Exchange Act and Rules 12b-20, 15d-1, and 15d-13 thereunder. The SEC’s litigation is ongoing. The SEC’s investigation was conducted by the Microcap Fraud Task Force. For further information, see Litigation Release No. 23537 (May 12, 2016).