The Securities and Exchange Commission obtained final judgments against NDB, Inc. (“NDB”), a private startup company formerly based in San Francisco, California, that is purportedly developing a nuclear-based battery, and its CEO, Nima Golsharifi, for allegedly defrauding investors by making materially false and misleading statements in a company press release.
The SEC’s complaint, filed in the U.S. District Court for the Northern District of California, charged NDB and Golsharifi with fraud violations under the federal securities laws, namely Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder.
The SEC’s complaint alleged that Golsharifi claimed that NDB’s purpose was to develop and manufacture a self-charging nuclear-based battery that would be enclosed in a diamond-like carbon structure. The SEC’s enforcement action further alleged that NDB and Golsharifi raised over $1.2 million from investors after falsely claiming in a press release that NDB had completed two successful proof of concept tests of its battery technology at two preeminent laboratories in the United States and United Kingdom, and had achieved a breakthrough 40% charge, a significant improvement over commercial diamonds. Proof of concept testing is commonly understood to mean that testing has been performed to confirm that a company’s idea for a product is workable in the real world, which is the precursor to the creation of an actual working prototype. NDB also claimed it had signed its first two beta customers to use, test, and provide feedback on the battery.
The SEC’s civil complaint contended that these claims were false and misleading because NDB had not tested its battery technology at either laboratory, and NDB had not signed any beta customers at the time of the press release. According to the complaint, NDB received significant attention from the news media, online blogs, and potential investors as a result of the Press Release, raised approximately $660,000 in the month following the press release and approximately $580,000 in additional investor funds in the subsequent 11 months.
Nima Golsharifi is the co-founder, CEO, and majority owner of NDB. He has controlled NDB’s business and research functions and operations from the Company’s formation and, at all times relevant to the complaint, was acting in his official capacity or acting in furtherance of the business, per the SEC’s claims. Accordingly, the actions, omissions, and state of mind of Golsharifi are imputed to NDB as a matter of law.
Without admitting or denying the allegations in the complaint, NDB and Golsharifi consented to the entry of the final judgments permanently enjoining them from violating Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The final judgments also ordered: (1) NDB to pay a $200,000 civil penalty; (2) Golsharifi to pay a $100,000 civil penalty; (3) Golsharifi barred from acting as an officer or director of a public company for a period of two years; and (4) a prohibition of Golsharifi from participating in the issuance, purchase, offer, or sale of any security for a period of two years, other than purchasing or selling securities for his own personal accounts.
The last component of this final judgment, the individual prohibition from participating in the issuance, purchase, offer or sale of a security (other than for a personal account), is called a conduct-based injunction and is increasingly and aggressively being used by the SEC in recent settlements. Historically, this type of injunction was limited to penny stocks, whether the alleged misconduct involved this low-priced security or not. It remains uncertain whether the courts will uphold this type of injunction that prohibits future, entirely legal conduct if challenged.
Have You Been Charged with SEC Fraud Violations? Call SEC Defense Attorney David Chase
Nationally recognized SEC defense attorney David Chase, of the Law Firm of David R. Chase, has successfully represented individuals in SEC investigations around the nation for more than two-and-a half decades, having previously worked in the SEC’s Division of Enforcement in the capacity as Senior Counsel. If you are under SEC investigation or just received a SEC subpoena anywhere in the country, and require experienced and thoughtful, strategic legal counsel to navigate you through the process and protect your interests, contact David at: 800-760-0912 or e-mail him at: david@davidchaselaw.com. Visit the Firm’s website for valuable content, to read about David’s SEC and FINRA defense background, and to review the firm’s prior successful defense results at: www.securitiesfrauddefense.net.
