Litigation Release No. 19795 / August 8, 2006
SEC v. Peter D. Kirschner and Media Magic, Inc., U.S.
District Court for the District of Columbia, Civil Action No.
06-1403RMU, filed August 8, 2006
SEC Sues Consultant Peter Kirschner for
Fraudulent Sales of Prematurely Issued Stock Dividend Shares
The Securities and Exchange Commission announced today that it
charged consultant Peter D. Kirschner with fraudulently procuring
stock dividend shares in advance of the date on which they were to
be publicly distributed and selling those shares into an uninformed
market at prices that did not yet reflect the increase in the total
number of outstanding shares. In addition, the Commission charged
Kirschner and Media Magic, Inc., formerly GLUV Corp., with offering
and selling these shares in violation of the registration provisions
of the federal securities laws.
The Commission's complaint, filed in the United States District
Court for the District of Columbia, alleges that Kirschner arranged
for GLUV's transfer agent to prematurely issue him 3,000,000
dividend shares in advance of the time at which dividend shares were
to be distributed to GLUV's other shareholders. There was no
publicly available information indicating that Kirschner's dividend
shares had been issued in advance of the payment date. Kirschner
sold 19,500 of these prematurely issued shares into the uninformed
market at prices ranging from $5.50 to $7.95 per share, realizing
net proceeds of $109,400. Had Kirschner sold the same quantity of
shares hours later, he would have realized gross proceeds of less
than $20, as these shares were then trading at less than a penny,
reflecting the adjustment by the market to the issuance the stock
dividend.
Specifically, the Commission charged Kirschner with violating
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 charged
Media Magic with violating Sections 5(a) and 5(c) of the Securities
Act. Without admitting or denying the Commission's allegations,
Kirschner consented to the entry of an order permanently enjoining
him from violating the registration and antifraud provisions of the
federal securities laws. Kirschner also consented to disgorge
$109,400 in ill-gotten gains, plus prejudgment interest, and pay a
$55,000 civil penalty. In a related Administrative Proceeding,
Kirschner consented to the entry of an order barring him from
association with any broker or dealer with the right to reapply for
association after five years to the appropriate self-regulatory
organization. Media Magic, without admitting or denying the
Commission's allegations, consented to the entry of an order
permanently enjoining it from violating the registration provisions
of the federal securities laws, and will pay a $55,000 civil
penalty.
SEC Complaint in this matter
