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CMKM Diamonds - The Hammer Falls

by hartleybernstein

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At last. Those CMKM chickens have come home to roost.

There is no joy in this story – only long-sought-for resolution. Thousands, of investors lost money as a result of the CMKM Diamonds, Inc. boondoggle. Over the years has published over 30 articles reporting on suspicious activities at CMKM and warning investors of the perils they faced by investing in a company with no business, assets or tack-record for truth.

Now, after a series of earlier skirmishes removed CMKM from the public marketplace, the SEC has taken a significant step, charging 11 individuals and three companies with conspiring to illegally issue and sell unregistered shares of CMKM. Along the way, these defendants allegedly pocketed $64 million from 40,000 investors nationwide.

Now you know where your money went – and developing diamond mines never was on the agenda.

The SEC complaint alleges that CMKM Diamonds, Inc., with assistance from a transfer agent and an attorney, fraudulently issued hundreds of billions of shares of purportedly unrestricted shares to an individual named John Edwards. As we reported in October 2006, Edwards reportedly relieved himself of 250 billion CMKM shares through 32 different accounts.

As the SEC complaint states (and we repeatedly reported) CMKM’s CEO Urban Casavant was instrumental to the scheme to inflate the value of and demand for CMKM’s shares. Casavant issued a series of misleading press releases and attempted – quite successfully – to generate investor interest by entering CMKM-sponsored cars in “funny car” races across the U.S.

The funny business was not limited to cars. Casavant never revealed that CMKM’s “business” was being run from his Las Vegas home or that its principal activity was stock promotion, not mining. According to the SEC, much of the investors’ money, about $64 million, went to support Casavant’s lavish lifestyle. The complaint alleges that Edwards profited by approximately $26.4 million from sales through a single broker-dealer, Casavant profited by approximately $31.5 million, and others recruited by Casavant profited by approximately $6.3 million.

The SEC's complaint, which was filed in U.S. federal court in Nevada, alleges that CMKM improperly issued up to 622 billion shares of purportedly unrestricted stock, based in large part on both written authorizations and attorney opinion letters prepared by CMKM’s lawyer, Brian Dvorak. The SEC says that Dworak’s opinion letters were often inadequate, suspect, and inconsistent. Nonetheless, the complaint alleges that based on these faulty documents, CMKM's transfer agent, 1st Global Stock Transfer, and its owner, Helen Bagley, issued “stacks of stock certificates without restrictive legends.”

According to the SEC's complaint, Edwards, Casavant, and their cohorts, Kathleen Tomasso, Anthony Tomasso, James Kinney and Ginger Gutierrez deposited the bogus stock certificates with various broker-dealers and sold the shares into the market. NevWest Securities Corporation and its employees, Anthony Santos, Sergei Rumyantsev, and Daryl Anderson, are alleged to have sold more than 259 billion shares of CMKM stock for Edwards, despite numerous red flags indicating a massive unregistered distribution.

The SEC is seeking a permanent injunction against all defendants and an accounting, disgorgement with prejudgment interest, and civil penalties against all of the defendants except CMKM. In addition, the Commission seeks a penny stock bar against each of the individuals and an order prohibiting Casavant from acting as an officer or director of any public company.

The SEC says its investigation is continuing.


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