The SEC filed a fraud action against Edward Ellis, Sr. and Jennifer Seidel, alleging that the two defrauded investors in connection with the purchase of shares in their company, Sederon, Inc. SEC v. Ellis, Civil Action No. 12-cv-1203 (E.D. Pa. Filed March 8, 2012). The case is in litigation.
Sederon is a home maintenance company headquartered in Collegeville, Pennsylvania. By mid- 2007 the company had insufficient funds to meet payroll and other expenses. Accordingly, the defendants sought to raise cash by selling shares in the company to the public. From August 2007 through October 2008 stock was sold to about 54 investors. The company raised approximately $519,500. In selling the shares the defendants made a series of misrepresentations, according to the complaint, including:
- Claims that Sederon was highly profitable;
- Statements that the business was rapidly expanding;
- A claim that an IPO would be forth coming ;
- A representation that IPO investors would be able to sell their shares in the open market at profits from 900 to 1,300 percent; and
- The shares were limited or then available at a “special discount.”
The defendants also failed to disclosure certain key facts to potential investors including:
- In 1994 Mr. Ellis had pleaded guilty to wire fraud charges in connection with another fraudulent offering of securities and was sentenced to 30 months in prison;
- Mr. Ellis had previously consented to the entry of a fraud injunction in a prior Commission proceeding based on the same conduct that send him to prison; and
- In May 2003 the Pennsylvania Securities Commission ordered Mr. Ellis to cease and desist from selling unregistered securities in a home maintenance company he owned which is a predecessor to Sederon.
The Commission’s complaint alleges violations of Securities Act Sections 5 and 17(a) and Exchange Act Section 10(b).