SEC Concludes Children’s Book Company Case

The Commission settled with the two remaining defendants in SEC v. Winning Kids, Inc., Civil Action No. 10-CV-80186 (S.D. Fla. Filed Jan. 29, 2010) (here). Defendants Victor Selenow and Edward Tamimi were salesmen for Winning Kids, Inc. The action centered on the sale of fraudulent interests in Winning Kids, a children's book company.

The two salesmen resolved charges against them by consenting to the entry of final judgments which impose permanent injunctions prohibiting future violations of Securities Act Sections 5 and 17(a) and Exchange Act Sections 10(b) and 15(A). Mr. Selenow also agreed to the entry of an order requiring him to pay disgorgement of $41,500 along with prejudgment interest and a civil penalty of $50,000. Likewise, Mr. Tamimi agreed to pay $194,250 in disgorgement plus prejudgment interest and a civil penalty of $130,000. See Litig. Rel. 21707 (Oct. 22, 2010). Previously, a default judgment had been entered against a third sales agent, Robert Comiskey.

The complaint was brought against Winning Kids, Inc., its founder and CEO, Christian Hainsworth, and the three former salesmen. According to the SEC, the defendants defrauded investors by selling unregistered securities through a series of private offerings marketed primarily on the radio. Investors were told that the company was operating, expanding nationally and experiencing extraordinary growth. The claims were bolstered by projections furnished to investors showing annual returns of 300%.

In fact, Winning Kids had virtually no revenue from the sale of its books or any other product. There was no basis for the sales projections according to the SEC. Investors also were not told that the salesmen were paid commissions of up to 20%.

The complaint alleged violations of Securities Act Sections 5 and 17(a) and Exchange Act Sections 10(b) and 15(a). The company and Ms. Hainsworth settled at the time the complaint was filed (also here). These two settlements conclude the litigation.

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