| NEWARK
- Digital Gas, Inc., Brian Smith of Spring
Lake, and William Brown of Bowmanville,
Ontario, Canada, were charged with securities
fraud in court papers filed Wednesday by
the New Jersey Bureau of Securities, Attorney
General Stuart Rabner, Consumer Affairs
Acting Director Stephen B. Nolan and Bureau
of Securities Chief Franklin L. Widmann
announced.
In court papers, the Bureau of Securities
alleges that Smith and Brown issued unregistered
Digital Gas stock to themselves and their
associates by creating fraudulent corporate
documents. In addition, Smith generated
false press releases on the Internet to
manipulate the price and demand of the stock
for his own benefit and the benefit of his
associates, the Bureau charges, and Smith
used Digital Gas funds for his personal
benefit, including paying for renovations
on his home.
“Smith and Brown went to great lengths
to rip off honest investors for their own
personal benefit,” said Attorney General
Rabner. “It is critical that we put
an immediate halt to these activities and
secure restitution for those whose money
was stolen. That is exactly what we are
doing now.’’
Digital Gas is a Michigan corporation that
publicly trades on the over the counter
market and is reported on the pink sheets
as DIGG.PK. The Bureau alleges that Digital
Gas is a shell corporation with no known
business operations. Digital Gas has no
known bank accounts or revenue.
An
ex parte Order to Show Cause, signed October
10, 2006 by Superior Court Presiding Chancery
Judge Alexander D. Lehrer temporarily banned
Digital Gas, Inc., Smith and Brown from
the following:
- any
conduct in violation of the New Jersey
Uniform Securities Law;
- selling
unregistered securities;
- acting
as unregistered broker-dealers and agents;
- employing
unregistered agents;
- destroying
or concealing documents; and
- selling
or promoting the sale of securities or
issuing any press releases in violation
of the securities law.
The Order also froze the assets of Digital
Gas, Brian Smith and his wife, Lynn Smith,
also of Spring Lake, including real property,
personal property, checking and savings
accounts, brokerage and trading accounts,
Digital Gas stock certificates, and all
other assets. A follow-up hearing is scheduled
for November 3, 2006.
“Digital
Gas was little more than a front for Brian
Smith’s illegal activities. Smith
enriched himself at the expense of investors,”
said Acting Director Nolan. “Digital
Gas and Smith are now prohibited from engaging
in their unlawful securities related activities.
By the Bureau’s action, this illegal
activity has been stopped and the first
step has been taken toward ensuring the
defendants won’t profit from this
scheme.”
The Bureau also alleges that Brian Smith
and Brown used fraudulent corporate resolutions
to cause the transfer agent to issue shares
of DIGG publicly traded stock. As of May
23, 2006, transfer records showed over 24
million DIGG shares available for public
trading. This scheme has resulted in the
loss of millions of dollars to Digital Gas
and its investors.
“This
conduct is yet another demonstration of
how the thinly traded over the counter market
can be corrupted for the gain of a few at
the significant expense of the investing
public” Widmann said. “Here,
Brian Smith, using his undisclosed control
of the company, issued false press releases
to make a virtually non-existent company
appear to have many commercial prospects.
This is a classic pump and dump scheme.”
The investigation was conducted for New
Jersey by Chief Investigator Rick Barry,
Supervising Investigator James Lane and
Investigators Julian Leone, Isaac Reyes
and Thomas LaGreca of the Bureau of Securities.
Deputy Attorneys General Anna Lascurain
and Chris Gerold handled the matter for
the Division of Law.
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