SEC Sues over Internet “pre-IPO” offering

The Securities and Exchange Commission announced that on September 14, 2000, it filed a civil lawsuit against, Inc. (1stBuy) and its founder and CFO, Roger D. Pringle. The SEC’s action pertains to a pre-ipo offering, an Internet stock offering conducted by 1stBuy during 1999 and early 2000 in which the company raised approximately $3.8 million from 1,200 investors nationwide.

While the offering was conducted pursuant to Regulation A, the issuer promoted the offering as a “pre-IPO” offering. The SEC claims that the defendants were inducing investments through false and misleading statements about the timing of a purported IPO, the projected value of its stock and the ability of the company to generate stockholder returns. The SEC’s complaint further alleges that the 1stBuy offering failed to meet the delivery and timing requirements of Regulation A in violation of the registration provisions of the Securities Act.

The SEC alleges that in statements made on 1stBuy’s website and in unsolicited e-mail messages, the defendants described 1stBuy’s offering as a “pre-IPO” offering and claimed that an IPO price range of $12 – $18 had already been set. The defendants further projected that a $5,000 investment would grow 1,200% in just one year and an additional 21,000% over the following three years. The defendants also represented that after the conclusion of its small business offering, 1stBuy would have a market capitalization of over $28 million and would easily meet the listing requirements of the NASDAQ small capitalization market.

In reality, the SEC claims, 1stBuy was rejected by the one brokerage firm it approached about underwriting an IPO; the projected returns had no basis in fact; the company failed to meet NASDAQ listing requirements; and the $28 million market capitalization figure was based on arbitrary and unsupported share price figure.

1stBuy and Pringle, without admitting or denying any of the allegations of the SEC’s complaint, simultaneously agreed to settle the charges that they violated the fraud and registration provisions of the federal securities laws. Under terms of the settlement, 1stBuy and Pringle will be permanently enjoined from future violations of Sections 5(a), 5(c) and 17(a) of the Securities Act and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. In addition, the proposed judgment orders Pringle to pay a civil penalty of $25,000.

Nothing herein is intended as legal or financial advice. The law is different in different jurisdictions, and the facts of a particular matter can change the application of the law. Please consult an attorney or your financial advisor before acting upon the information contained in this article.


Mark J. Astarita is a veteran securities attorney representing investors and financial professionals nationwide in securities investigations and arbitrations. Have a question? Email him at, call his office at 212-509-6544, or visit The Securities Lawyer

Securities Attorney at Sallah Astarita & Cox | 212-509-6544 | | Website | + posts

Mark Astarita is a nationally recognized securities attorney, who represents investors, financial professionals and firms in securities litigation, arbitration and regulatory matters, including SEC and FINRA investigations and enforcement proceedings.

He is a partner in the national securities law firm Sallah Astarita & Cox, LLC, and the founder of The Securities Law Home Page -, which was one of the first legal topic sites on the Internet. It went online in 1995 and is updated daily with news, commentary and securities law related links.