Receiver, Assets Freeze Asked in Case of Penny Stock King
The Securities and Exchange Commission on Monday asked a federal judge to appoint a receiver to oversee the crumbling penny stock empire of Orange County businessman David Sterns and place a permanent freeze on his assets.
The SEC made the request two weeks after filing a civil lawsuit against Sterns alleging that he defrauded thousands of investors of $10 million through the sale of stock--usually priced at under $1 a share--in several shell companies.
Sterns, 55, of Irvine, has denied the civil charges. He has acknowledged that he is under investigation by a federal grand jury on related criminal charges.
On Monday, U.S. District Court Judge Edward Rafeedie said he will decide Wednesday whether a court-appointed receiver is warranted in the case and whether to impose a permanent freeze on Sterns’ assets. He continued a temporary asset freeze for another 10 days.
Sterns is currently president of Huntor Group, a Torrance-based pharmaceutical company. SEC attorneys told Rafeedie that Huntor is encountering business problems--including possible eviction for nonpayment of rent--and ask for a receiver in an effort to preserve any funds that might be used to pay back investors.
Sterns and his associates set up a network of small companies in Laguna Hills, known collectively as the Ultimate Business Network, or UBN. Seven of the companies were publicly traded in the mid- to late 1980s.
The SEC has charged that they sold more than 36 million shares of unregistered stock and falsified corporate records, including removing risk warnings from prospectuses given to investors.
UBN made a number of claims to investors that the SEC says were not true, including that Sterns had taken 116 companies public with no regulatory problems, was the most quoted individual in the Wall Street Journal during the 1970s, had been featured on the cover of Fortune magazine, owned 1% of the landmass of Panama and had helped liberate the Marshall Islands.
