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UNITED STATES DISTRICT COURT
UNITED STATES DISTRICT COURT
Plaintiff, the United States Securities and Exchange Commission ( the "SEC"), files this action against Defendant Millennium Financial, Ltd. ("Millennium"), and against Relief Defendant Newpont Fiduciaries & Nominees, S.A. ("Newpont"). NATURE OF THE ACTION 1. This case involves an ongoing worldwide scheme by Defendant Millennium to defraud investors through the offer and sale of purported pre-initial public offering ("pre-IPO") stock of at least three U.S. companies on the basis of false and misleading statements. Millennium has engaged in boiler room tactics and, among other things, has falsely told investors that (i) it is an offshore "international securities and financial consultancy firm" with offices in Brazil, Mexico, Singapore and Switzerland; (ii) a particular U.S. company would have an IPO within a time frame that typically ranged from one to five months in the future; (iii) investors who purchased pre-IPO stock could sell their shares at a profit before the IPO; (iv) the IPO offering price would be substantially higher thanthe cost of the pre-IPO shares; and (v) the stock price would increase substantially yet again in post-IPO trading. In fact, Millennium did not have offices in Brazil, Mexico, Singapore and Switzerland, no IPO occurred within the time that Millennium represented, there was no market in which to sell the pre-IPO stock at a profit, and there was no basis for claiming that the pre-IPO stock would substantially rise in value. 2. Since October 2000, over 150 investors have paid at least $2 million to Millennium. Defrauded investors wired at least $1.7 million of these funds through banks in New York City. These investors are primarily located outside the U.S., with the majority of known investors in the United Kingdom and Ireland. The SEC brings this action to enjoin Millennium from continuing to violate the federal securities laws in connection with its ongoing, fraudulent offer and sale of securities. 3. By engaging in the acts alleged in this Complaint, Millennium has violated and unless enjoined will continue to violate Section 17(a) of the Securities Act of 1933 ("Securities Act") [15 U.S.C. § 77q(a)], Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") [15 U.S.C. §§ 78j(b)], and Rule 10b-5 thereunder [17 C.F.R. § 240.10b-5]. JURISDICTION AND VENUE 4. The SEC brings this action pursuant to authority conferred upon it by Section 20(b) of the Securities Act and Section 21(d)(1) of the Exchange Act [15 U.S.C. §§ 77t(b) and 78u(d)(1)], seeking to permanently enjoin Millennium from engaging in the wrongful conduct alleged in this Complaint. The SEC also seeks a final judgment ordering Millennium and Relief Defendant Newpont Fiduciaries & Nominees, S.A. to disgorge ill-gotten gains and to pay prejudgment interest thereon, and further ordering Millennium to pay civil money penalties pursuant to Section 20(d) of the Securities Act [15U.S.C. § 77t(d)] and Section 21(d)(3)(A) of the Exchange Act [15 U.S.C. § 78u(d)(3)(A)]. 5. This Court has jurisdiction over this action pursuant to Section 22(a) of the Securities Act and Section 27 of the Exchange Act [15 U.S.C. §§ 77v(a) and 78aa]. 6. Millennium, directly and indirectly, has made use of the means and instrumentalities of interstate commerce, the means and instruments of transportation and communication in interstate commerce, or of the mails, in connection with the transactions, acts, practices, and courses of business complained of herein. 7. Certain of the transactions, acts, practices, and courses of business alleged herein occurred within the Southern District of New York. DEFENDANT 8. Millennium Financial, Ltd. ("Millennium") purports to be an international securities and financial consulting firm headquartered in the Montevideo Free Trade Zone in Uruguay, with offices in Brazil, Mexico, Singapore, and Switzerland. In fact, Millennium conducts some of its activities from or through the United States. RELIEF DEFENDANT 9. Newpont Fiduciaries & Nominees, S.A. ("Newpont"), location and principals unknown, received at least $350,000 in an offshore account from at least 30 investors who purchased some of the pre-IPO and exchange-traded securities that Millennium fraudulently offered, and wired these funds to Newpont's account pursuant to Millennium's instructions. OTHER ENTITIES 10. Key Card Communications, Inc. ("Key Card") was, until August 2001, a private Florida corporation that was incorporated in May 2000. In August 2001, Key Card completed a reversemerger with Fighton Succession Corporation, a public reporting company. Key Card markets prepaid phone calling cards, and is headquartered in Sarasota, Florida. 11. kNutek Holdings, Inc. ("kNutek") is a private California corporation with headquarters in Berkeley, California. Incorporated on November 21, 2001, its products include herbal cleansers, fruit tonics, and wrinkle removers. 12. Sonic Garden, Inc. ("Sonic Garden") is a private California corporation with headquarters in San Francisco, California. Incorporated on July 17, 2001, it is an Internet music provider. FACTS Background 13. Since at least October 2000, Defendant Millennium has sold and offered for sale, exchange-traded securities and purported pre-IPO stock in various issuers, including Key Card, kNutek, and Sonic Garden. At least 150 investors have paid Millennium over $2 million for stock in these companies. At least one of these investors is located in the U.S. The remaining investors are located in over twenty different countries, with the majority of those known located in England and Ireland. 14. Millennium instructed investors to wire money through intermediary banks in New York City. At least $1.7 million of funds that investors paid to Millennium were wired through nineteen of these banks to Millennium's bank account in the Caribbean island of Nevis. A Millennium representative told an investor that he was the head of Millennium's compliance department and was based in New York. 15. Pursuant to Millennium's instructions, investors wired at least $350,000 to Relief Defendant Newpont's bank account, purportedly for the purchase of the exchange-traded and pre-IPO stock that Millennium fraudulently offered and sold. 16. Millennium has obtained names of potential investors from sources including its current Internet site, www.millfinltd.com, which contains a subscription form for its newsletter, the "Millennium Report." The Millennium Report contains information about issuers of exchange-traded securities and Key Card. 17. Millennium's sales agents have made unsolicited telephone calls, primarily to foreign prospective investors. During some of these initial calls, the sales agents offered them the opportunity to purchase exchange-traded securities, some of which are listed on the New York Stock Exchange. At times, Millennium offered and purportedly sold these exchange-traded securities at below market prices, and then claimed to sell them at a higher price in order to show that the investors earned a profit. Millennium received at least $400,000 from investors for these exchange-traded securities. 18. After showing investors an apparent "profit," or by warning of an imminent loss in the exchange-traded companies, Millennium recommended that they purchase the pre-IPO stocks discussed herein. Over a dozen of Millennium's investors followed its recommendation to purchase the pre-IPO stocks after having purchased and sold the exchange-traded securities that Millennium offered. 19. Millennium's sales agents also offered potential investors pre-IPO stock in companies such as Key Card, kNutek, and Sonic Garden. Millennium's Material Misrepresentations and Omissions 20. Millennium, in its written materials and through its sales agents, made materially false and misleading representations to prospective investors concerning: (i) Millennium's operations andexpertise; (ii) investors' ability to sell the pre-IPO shares; (iii) the price at which these shares would trade; and (iv) the timing of the IPOs. False Statements Concerning Millennium's Operations and Expertise 21. Millennium, through its brochures, claims to have "Service Offices" around the world, including Brazil, Mexico, Singapore, and Switzerland, in addition to headquarters in the Montevideo Free Trade Zone in Uruguay. In its brochures, Millennium claims that its Swiss office is located at the World Trade Center in Zurich, with corresponding facsimile and telephone lines. Millennium also claims that its Brazil office is at the World Trade Center in Sao Paulo, Brazil. Sales agents from Millennium have told some investors that they were calling from Millennium's office in Switzerland. In fact, Millennium had no physical presence at any of its listed locations in Brazil, Mexico, Singapore, or Switzerland. Millennium paid other businesses to reroute mail, faxes, and telephone calls to at least three other countries. 22. Since at least 2001, Millennium has mailed brochures to investors stating that it has "executed many successful exempt offerings in a broad range of industries" under Regulations S and D of the Securities Act of 1933. In fact, SEC records do not indicate that Millennium has been involved in any such exempt offerings, and is not registered with the Commission in any capacity. 23. Since March 2000, the Central Bank of Ireland has issued three warning notices, published in newspapers circulating in the Republic of Ireland, naming Millennium as a firm which operates as an investment business firm in Ireland without appropriate authorization.
24. Millennium's statements concerning an office in Zurich, Switzerland, and having executed "many successful exempt offerings" were materially false, and made in connection with the offer or sale of securities.
25. Millennium knew or was reckless in not knowing that these statements were false.
False Statements Concerning The Existence of Pre-IPO Market
26. Since at least 2001, Millennium's sales agents represented to prospective investors that they could resell the pre-IPO stock for a profit before the IPO.
27. In the spring of 2001, through telephone calls made by a sales agent, Millennium told investors that they could sell their pre-IPO shares of Key Card before the IPO for $7.50 to $10, as demand would cause the "bid price" to increase.
28. Since at least October 2001, Millennium offered investors pre-IPO shares of kNutek at $5.10 per share, and told investors that kNutek shares could be sold within two weeks for a profit of $2 to $3 per share.
29. Through telephone calls made by its sales agents, Millennium made misleading statements about kNutek that suggested it was trading on the New York Stock Exchange. In October 2001, a Millennium sales agent told one investor that kNutek's "[t]urnover is around $1 billion. They are floating on the NYSE main board to fund sales and cash flow which has outstripped their forecasts and put pressure on the company's banks."
30. On December 14, 2001, Millennium told an investor that they could sell their Sonic Garden pre-IPO shares before the IPO at $8 per share.
31. Notwithstanding Millennium's statements noted in paragraphs 26-29 above, the pre-IPO stock of Key Card, kNutek, and Sonic Garden has not traded in any market or on any exchange.
32. Millennium's statements concerning a market for Key Card, kNutek, and Sonic Garden pre-IPO stock were materially false, and made in connection with the offer or sale of securities.
33. Millennium knew or was reckless in not knowing that these statements were false.
False Statements Concerning Future Appreciation of the Pre-IPO Stock Price
34. In an edition of the Millennium Report, mailed in or about February 2001, Millennium represented to investors that it purchased Key Card pre-IPO shares at $5 per share. In fact, however, upon information and belief, Millennium obtained the stock for $0.50 to $1 per share and sold it to investors for at least $5 per share.
35. Millennium made baseless price predictions to investors and potential investors concerning the anticipated price at which Key Card's pre-IPO stock would be offered in the IPO. Specifically, on or about March 21, 2001, Millennium's sales agents represented that in Key Card's IPO, its stock would be offered at $5 to $15 over the investor's initial purchase price.
36. During 2001, in an edition of the Millennium Report, Millennium falsely claimed that, after the IPO, Key Card's stock price subsequently would rise to $50 per share.
37. On December 14, 2001, Millennium told an investor that, in February 2002, Sonic Garden would be publicly offered at $18 to $22 per share.
38. Millennium's statements concerning Key Card's and Sonic Garden's stock and stock price were materially false, and made in connection with the offer or sale of securities.
39. Millennium knew or was reckless in not knowing that these statements were false.
False Statements Concerning The Timing of IPOs
40. In early March 2001, during a telephone conversation, Millennium's sales agents told prospective investors that Key Card would "launch" an IPO in April or May 2001. In April or May 2001, Millennium later told these investors that the launch would be in June or July 2001.
41. In July 2001, after Key Card's IPO did not occur in the time that Millennium promised, Millennium, through its sales force, told investors that the reason for the delay in the IPO was that Key Card was installing a large number of point of sale "issuance points" around the U.S.
42. In November 2001, during a telephone conversation, one of Millennium's sales agents told prospective investors that kNutek had an IPO "launch date" of March 17, 2002.
43. Millennium's statements concerning the timing of Key Card's and kNutek's IPOs and the reasons for the delay in Key Card's IPO were materially false, and made in connection with the offer or sale of securities.
44. Millennium knew or was reckless in not knowing that these statements were false.
FIRST CLAIM
VIOLATIONS OF
[15 U.S.C. § 77q(a)]
45. The SEC realleges and repeats its allegations set forth at paragraphs 1 through 44 of this Complaint.
46. Since October 2000 to the present, Defendant Millennium, directly or indirectly, by use of any means or instruments of transportation or communication in interstate commerce or by use of the mails, in the offer or sale of securities, as described herein, has (a) knowingly, willfully, or recklessly employed a device, scheme or artifice to defraud; (b) obtained money or property by means of an untrue statement of material fact or omission to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading; or (c) engaged in a transaction, practice or course of business which operates and will operate as a fraud or deceit upon the purchaser of such securities.
47. By reason of the foregoing, Defendant Millennium has violated, and unless enjoined will continue to violate, Section 17(a) of the Securities Act [15 U.S.C. § 77q(a)].
SECOND CLAIM
VIOLATIONS OF
[15 U.S.C. § 78j(b); 17 C.F.R. § 240.10b-5]
48. The SEC realleges and repeats its allegations set forth at paragraphs 1 through 44 of this Complaint.
49. Since October 2000 to the present, Defendant Millennium directly and indirectly, by the use of any means or instrumentality of interstate commerce, or of the mails, or of any facility of any national securities exchange, in connection with the purchase or sale of any security, as described herein, has knowingly, willfully, or recklessly: (a) employed a device, scheme or artifices to defraud; (b) made an untrue statement of material fact or omitted to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading; or (c) engaged in an act, practice, or course of business which operated, or would operate as a fraud or deceit upon any person.
50. By reason of the foregoing, Millennium violated, and unless enjoined will continue to violate, Section 10(b) of the Exchange Act [15 U.S.C. § 78j(b)] and Rule 10b-5 [17 C.F.R. § 240.10b-5], thereunder.
THIRD CLAIM
AGAINST RELIEF DEFENDANT
51. The SEC repeats and realleges Paragraphs 1 through 44 above.
52. Relief Defendant Newpont has been and is, upon information and belief, in possession, custody and control of certain assets of defrauded investors who purchased securities from Defendant Millennium.
PRAYER FOR RELIEF
WHEREFORE, the SEC respectfully requests that this Court enter a judgment:
(i) permanently enjoining Defendant Millennium, its officers, agents, servants, employees, attorneys, and all persons in active concert or participation with it, and each of them, from violating:
(ii) ordering Defendant Millennium, and Relief Defendant Newpont to disgorge all ill-gotten profits or proceeds that they have received as a result of the acts and/or courses of conduct complained of herein, with prejudgment interest;
(iii) ordering Defendant Millennium to pay a civil penalty pursuant to Section 20(d) of the Securities Act [15 U.S.C. § 77t(d)] and Section 21(d)(3) of the Exchange Act [15 U.S.C. § 78(d)(3)]; and
(iv) granting such other and further relief as may be necessary and appropriate.
Dated: May___, 2002
Respectfully submitted,
OF COUNSEL:
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