HOUSTON (CN) - A group of investors can amend their class-action claims against the Texas attorney who allegedly defrauded them with a sham corporation, a federal judge ruled.
Seventeen investors across the United States filed a class action for fraud against Exobox Technologies in Harris County, Texas. The 2010 complaint also named 18 alleged co-conspirators as defendants.
"Exobox was created and operated by defendants as a sham corporation designed to provide benefit to the attorneys, officers, directors and brokers that participated in and orchestrated the reverse merger and 'operations' of the corporation," according to the complaint. "Defendants also controlled the float of Exobox stock in the marketplace, failed to make proper disclosures to the class, and engaged in insider transactions, among other things, all designed to provide financial benefit to defendants to the detriment of Exobox and the class members."
With the case now underway in the Southern District of Texas, Exobox remains as a defendant alongside just seven individuals: attorney Robert Sonfield; Donald Bradley; Jeffrey Bradley; attorney Jason Landess; Marc Lane; Roger Brewer; and Alexanderia Blankenship.
On Monday, U.S. District Judge Keith Ellison dismissed the investors' state-law claims for fraud, misrepresentation and conspiracy. In addition to tossing claims of aiding and abetting, Ellison also dismissed the claim that Landess violated federal securities law.
Sonfield must still face claims that he lied in public filings with the Securities and Exchange Commission and that he misrepresented Exobox tradability in an opinion letter to Pink Sheets.
The investors can file an amended complaint, but Ellison limited their focus to bolstering claims about Sonfield's tradability letter and his alleged misstatements in Exobox's public filings.
Ellison said the allegations must conform with the Supreme Court's 2011 ruling in Janus Capital Group v. First Derivative Traders, which "held that 'the maker of a statement is the person or entity with ultimate authority over the statement, including its content and whether and how to communicate it.'"
A 2008 SEC complaint that characterizes the Exobox scheme as a $3.91 million fraud also remains pending in the Southern District of Texas.
So far, U.S. District Judge Lynn Hughes has only issued final judgment in the SEC action against Donald Bradley, and his son, Jeffrey Bradley, holding them jointly and severally liable for the disgorgement of $204,000 plus prejudgment interest.
Noting evidence of the Bradleys' finances, however, Hughes waived payment.
The orders enjoin the Bradleys from violating Section 5 of the Securities Act of 1933 and permanently bar them from participating in stock offers with a share price under $5.
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