(January 23 -18:10 ET1) – The U.S. Securities and Exchange Commission today announced settlements in one of its online pump-and-dump cases.

Back in December 1999, the SEC alleged that the three defendants acquired large blocks of stock of NEI Webworld for pennies per share, and created demand for the stock by disseminating false takeover rumours on the Internet. The trio then sold their stock into the rising market for a profit of about US$364,000. The SEC subsequently uncovered a scheme to use the Internet to manipulate the market for 11 other issuers.

Yesterday Hootan Melamed and Allen Derzakharian, two of three defendants, agreed to settle the case, without admitting or denying the allegations, by disgorging their trading profits and consenting to permanent injunctions against future violations.

The SEC also filed a new action naming a fourth individual, Arash Molayem, for participating in the NEI Webworld and other Internet manipulations. Molayem also consented to a permanent injunction and agreed to disgorge his trading profits. The complaint against Arash Aziz-Golshani, the third defendant in the original case, remains pending.

Separately, the U.S. Attorney for the Central District of California prosecuted Aziz-Golshani and Melamed on criminal charges. Aziz-Golshani pled guilty to one count of securities fraud and one count of conspiracy to commit securities fraud. Melamed pled guilty to one count of conspiracy to commit securities fraud.

Aziz-Golshani was sentenced to 15 months incarceration and ordered to pay restitution in an amount to be determined. Melamed was sentenced to 10 months and also ordered to pay restitution.
-IE Staff