SAN FRANCISCO (CN) - Pegasus Wireless Corp. and its president Jasper Knabb and CFO Stephen Durland defrauded the market for $30 million by issuing hundreds of millions of shares to, among others, Knabb's in-laws and mistress, and lying about it, the SEC claims in Federal Court.
The SEC claims Knabb and Durland forged and backdated documents, falsely told the SEC that they owned "only minimal amounts of shares," and inflated the putative value of "this once unheralded penny stock [to] a market capitalization of more than $1.4 billion. Unbeknown to investors, however, Knabb and Durland secretly controlled hundreds of millions of Pegasus shares, which they dumped on individual investors and the open market through 2006 and 2008, as Pegasus' share price steadily declined to pennies."
The SEC says Knabb and Durland "reaped more than $30 million through their securities law violations. They used the funds to support their extravagant lifestyles, including the purchase of homes, boats and sports cars."
The SEC claims that the two men "were basically printing Pegasus shares to enrich themselves. By February 2008, Pegasus had issued more than 75 percent of its total outstanding shares in this fraudulent manner."
The SEC seeks disgorgement, penalties and an injunction.
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