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A former corporate counsel of a onetime leather bag maker July 19 was charged criminally and sanctioned by the SEC for allegedly participating in securities fraud ( In re Lubin , S.E.C., Admin. Proc. File No. 3-18070, 7/19/17 ; United States v. Lubin , S.D. Fla., 17-20508-cr-Cooke/Goodman, 7/19/17 ).
Attorney David Lubin of West Hempstead, N.Y., faces one count of conspiracy to unlawfully sell unregistered securities in connection with his time at Entertainment Art Inc., which later became Biozoom Inc. He could spend up to five years in prison and be fined $250,000 under the charges filed in the U.S. District Court for the Southern District of Florida.
Lubin also was barred by the Securities and Exchange Commission from practicing before it and acting as an officer or director of a public company. He will have a hearing in the agency’s in-house court over possible disgorgement and penalties.
A large Entertainment Art shareholder, Lubin arranged the sale of all its outstanding stock to an acquaintance who wanted to purchase shell companies, according to the SEC. The stock included restricted and previously registered shares that were supposedly “free trading,” the agency said. Common ownership of all the public company’s stock would require the owner to register the shares for resale to the public unless there were an exemption, the commission said.
Lubin left the false impression in an Entertainment Art corporate filing that the stock remained immediately available for resale to the public, the SEC said. The lawyer then continued to lie about the actual ownership of the shares in subsequent filings with the commission, according to the agency.
More than 14 million shares were illegally resold to the public for proceeds of $34 million when Entertainment Art became Biozoom in 2013, the SEC said. The commission froze assets from the sales.
“As the SEC’s order notes, Lubin drafted and signed misleading public filings and masked the true ownership and restricted nature of a significant portion of the company’s stock,” Antonia Chion, associate director in the SEC’s Enforcement Division, said in a statement. “Lubin’s deception led to many of these same shares being illegally resold to the general public by others a few years later.”
New York lawyer Charles A. Ross, who is representing Lubin, told Bloomberg BNA his client is a “wonderful man.”
“He is loyal to his family and his community and is an all-around-good person,” Ross said.
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