SEC v. Gary J. Gross; and Steven M. Larimore, Southern District of Florida (June 22, 1990) — Complaint

UNITED STATES DISTRICT COURT 

SOUTHERN DISTRICT 
OF FLORIDA 

CASE NO.: 
08-81 039-CIV-MARRAIJOHNSON 
SECURITIES AND EXCHANGE 
COMMISSION, 
FILEDby IG D.C.
Plaintiff, 
ELECTRONIC 
v. 
SEPT 22,2008 
GARY J. GROSS, 
STEVEN M. LARIMORE 
CLERK 
U.S. OIST. CT. 
Defendant. 
S. 0. OF FLA. .MIAMI 
COMPLAINT 
Plaintiff Securities and Exchange Commission alleges: 
I. INTRODUCTION 
1. 
From at  least early 2004 through approximately September 2006, Gary Gross, a 
former registered representative 
with broker-dealer Axiom Capital Management, Inc., defrauded 
several of his customers by making material misrepresentations and omissions about the risks 
and suitability of securities he bought for 
them, churning customer accounts, and fabricating 
customer account values. Many of Gross' victims were elderly Jewish investors who trusted 
Gross based on his statements that he was involved in the Jewish community and their perceived 
personal relationships with him. 
2. 
Gross persuaded many customers to open Axiom brokerage accounts and transfer 
existing accounts to Axiom by pledging he could deliver greater income from and safety in their 
investments than their current brokers. Once customers invested finds, Gross frequently 
disregarded their largely conservative investment objectives in favor of unsuitable mutual and 
closed-end finds without disclosing the associated risks. Gross also frequently churned his 

customers' accounts and made other unsuitable trades that benefited him at the expense of his 
customers. 
3. In 2005, Gross began purchasing risky, illiquid private placements and private 
investments in public equities in his customers' accounts. Gross emphasized the purported profit 
potential of these investments while failing to disclose their substantial risks. In late summer 
2005, Gross also began recommending and making purchases of a  highly speculative penny 
stock for his customers 
-all contrary to their generally risk-averse investment objectives. 
4. 
Beginning in September 2005, when some customers complained about their 
losses and asked questions about their account statements, Gross again abused their trust and 
lied. He told them to ignore the account statements as inaccurate and created fi-audulent 
documents that misrepresented the actual value of their investments and sometimes included 
baseless projections. Through his misconduct, Gross generated substantial commissions and 
other fees, while many customers lost large amounts of their investments. While Gross reaped 
more 
than $700,000 in ill-gotten gains, his customers lost more than $2.7 million. 
5. 
By engaging in the conduct described above, and described more fully below, Gross 
violated Section 17(a) of the Securities Act of 1933 ("Securities Act"), 15 U.S.C. 
8 77q(a); and 
Section lo@) and Rule lob-5 of the Securities Exchange Act of 1934 ("Exchange Act"), 15 U.S.C. 
8 78j@) and 17 C.F.R. 5 240.10b-5. Unless enjoined, Gross is reasonably likely to continue 
violating the securities laws. 
11. DEFENDANT AND RELEVANT ENTITY 
6. 
Gross, 56, is a resident of Far Rockaway, New York. From January 2003 through 
early January 2007, Gross lived in Boca Raton, Florida and was associated as a  registered 
representative with Axiom in its Boca Raton branch office. Gross is the subject of more than 

twenty customer complaints filed with the Financial Industry Regulatory Authority in connection 
with his activities at Axiom. While Gross is not currently associated with a broker-dealer, he 
still maintains Series 7,63 and 65 securities licenses. 
7. 
Axiom is a  Delaware corporation with its principal place of business in New 
York, New York. 
It has been registered with the Commission since June 22, 1990 as a broker- 
dealer. Axiom was also registered as an investment adviser from June 2004 through October 
2006. From December 2002 through early 2007, Axiom maintained its only branch office in 
Boca Raton. 
111. JURISDICTION AND VENUE 
8. This Court has jurisdiction over this action pursuant to Sections 20(b), 20(d), and 
22(a) of the Securities Act, 
15 U.S.C. 55 77t(b), 77t(d), and 77v(a); and Sections 21(d), 21(e), 
21A and 27 of the ~xchan~e Act, 15 U.S.C. 
55 78u(d), 78u(e), 78u-1 and 78aa. 
9. 
This Court has personal jurisdiction over Gross and venue is proper in the 
Southern District of Florida because Gross' acts, transactions, practices, and courses of conduct 
giving rise to the violations alleged in this Complaint occurred in the Southern District of 
Florida. Specifically, during the events alleged in the Complaint, Gross resided in the Southern 
District of Florida, and conducted business and engaged in the abusive sales practices described 
in this Complaint there. 
10. Gross, directly and indirectly, made use of the means and instrumentalities of 
interstate commerce, the means and instruments of transportation and communication in 
interstate commerce, and the mails, in connection with the acts, transactions, practices, and 
courses of conduct set forth in this Complaint. 

IV. FACTS 

11. 
From at least early 2004 through approximately September 2006 ("the relevant 
time"), Gross convinced customers to open accounts with him at Axiom or switch their 
brokerage accounts there. Many of Gross' customers often were elderly, unsophisticated 
investors, who wanted only to preserve their principal and grow their portfolio while investing 
with minimal risk. Instead of helping these people pursue their goals, Gross defrauded them by 
making materially misleading and unsuitable recommendations, engaging in unauthorized 
trading and churning, and giving them falsified and baseless account statements. 
A. Gross' Misleading and Unsuitable Recommendations and Unauthorized Purchases 
1. Misleading and Unsuitable Recommendations 
12. 
During the relevant time, Gross recommended placing, and placed, customers in 
mutual and closed-end funds, while failing to disclose the risks associated with those investments 
and their unsuitability for his customers' investment objectives. 
13. Once customers transferred their accounts to Axiom, Gross routinely liquidated 
substantial portions of their investments, often consisting of diversified, relatively low-risk 
securities such as conservative mutual funds, blue chip stocks and bonds, and replaced them with 
large concentrations of funds such as the Kelmoore Strategy Eagle Fund and another Kelmoore 
mutual fund. 
14. Gross failed to disclose to his customers the risk factors associated with Kelmoore 
funds, including Kelmoore Eagle's covered call option strategy and the volatility inherent in the 
mid-cap companies Kelmoore Eagle held, among other things. He failed to make these 
disclosures despite the fact that Kelmoore prospectuses discussed these risks and described an 
investment strategy contrary to that which Gross' customers sought. As discussed in more detail 

below, after investing heavily in Kelmoore, Gross made these unsuitable investments even less 
appropriate for his customers by liquidating them after only a short period, also in disregard of 
the Kelmoore prospectuses' recommendations. 
15. 
For example, one of Gross' customers was a 69-year-old retiree whose investment 
objectives were income and growth. In March and April 2005, Gross invested more than half of 
her portfolio in Kelmoore Eagle, telling her it  provided good income and falsely stating there 
was no risk. 
In just six weeks, Gross purchased $575,000 of Kelmoore Eagle in her account. 
Gross liquidated the entire position 33 days later for a net loss of approximately $13,500, while 
generating approximately $1 5,000 in sales charges fiom these transactions. 
16. 
Gross' abusive activity was exacerbated by his practice of trading on margin in 
his customers' accounts. Gross used margin to effect larger purchases of unsuitable funds than 
his customers could have made had they not used margin. Gross never discussed margin trading 
with his customers prior to utilizing it in their accounts, and did not disclose the risks associated 
with margin, such as higher costs through interest payments and potentially increased losses. 
17. 
Further, while Gross promised his customers large monthly income payments, he 
failed to disclose the income they received fiom Kelmoore and other, similar funds was reduced 
by the margin interest charged. Gross told some of his customers not to worry about margin call 
letters they received, and directed them to throw the letters away. 
18. 
Gross also materially misled his customers about other unsuitable funds he 
pitched. For example, he recommended his customers invest in initial public offerings, even 
though these funds had no track record. He also recommended non-diversified funds such as 
those limited to a  particular country. Gross failed to disclose to his customers the risks 
associated with these investments. 

2. Gross' Unauthorized Trading 
19. 
Additionally, Gross often conducted unauthorized trading on behalf of his 
customers. Although Gross did not have discretionary customer accounts, he often effected 
transactions in various securities without obtaining the customers' authorization. 
This trading 
usually cost his customers money but generated more than $500,000 in commissions for himself. 
20. 
For example, in the account of a  97-year-old customer, Gross made seventeen 
unauthorized buys of unsuitably risky funds between February and October 2006, purchasing an 
aggregate amount of $1,558,000. He falsely marked eight of those transactions as ones he did 
not solicit from the customer. During this same period, Gross made seven sales transactions in 
these funds, even though the customer had held them for less than two months, and even though 
the sale price was almost always the same as or lower than the purchase price. During those nine 
months, Gross generated approximately $40,000 in commissions from this trading in the 
customer's account. The customer's account lost $420,300 in net equity and was charged 
$46,000 in margin interest, while developing a margin debt of more than $675,000 by the end of 
November 2006. 
3. Misleading and Unsuitable Recommendations of Private Placements and PIPEs 
21. 
From early 2005 through approximately September 2006, Gross touted the 
purported profit potential of various private placements and investments known as PIPEs (private 
investments in public equities) to his customers. Gross told his customers the private placements 
and PPEs were riskless and the issuers were high-quality companies. Gross promised some 
customers they would be able to sell these investments within months and reap large profits. 
22. 
Gross, however, failed to disclose the risks accompanying these investments. For 
example, contrary to his representations, the companies were start-up ventures in search of 

fknding, with little or no track record. Gross also did not tell customers they would receive 
restricted stock they could not trade until the issuers' registration statements were declared 
effective. Additionally, Gross did not tell his customers that the issuers' registration statements 
could be delayed, and that customers would consequently be unable to convert their restricted 
shares into free-trading common stock within the time Gross promised. 
23. 
The private placements and PIPEs were unsuitable recommendations for at least 
four of Gross' customers who, in light of their need for low-risk and conservative investment 
objectives, could ill afford the risks associated with these speculative and illiquid securities. At 
least four of the customers Gross defrauded into investing in the private placements and PIPES 
were elderly and risk-averse, with limited annual income and an investment objective of income 
and growth. 
24. In the case of one elderly female customer, who had invested approximately 
$700,000 with Gross in 2005, Gross liquidated $500,000 of her portfolio to purchase private 
placement and PIPE offerings, and margined other parts of her portfolio for additional, similar 
investments during the spring and summer of 2005. 
In August 2005, in response to her concerns 
about 
the risky nature of the private placements and PIPEs, Gross told the customer her 
purchases were 
in high-quality companies guaranteed to make money. He also promised nothing 
could happen to her money with those investments, and if they did not work out he could return 
her money by selling her holdings to institutional clients. Gross never told her he was using 
margin for her purchases and never explained the risks or costs of margin. 
25. In December 2005, Gross further deflected the customer's concerns with 
fraudulent written calculations showing her $75,000 PIPE investment was worth $129,500. 

Gross based these calculations on a value of $3.50 per share, which was baseless because the 
free-trading stock of the company was, at most, 
$1.95 per share. 
26. In March 2006, Gross opened a new account for a couple in their late seventies. 
The husband suffered from mild dementia, and the wife handled most investment decisions by 
herself Without explaining the purpose, Gross convinced the customer to liquidate more than 
33% of the account's net equity, or approximately $250,000. Gross then used that money to buy 
a private placement in a company called Mobilier, Inc. without getting prior authorization for the 
purchase. 
27. 
When the customer received her statement in the spring of 2006, she called Gross 
for an explanation. Gross falsely told her he had purchased the shares fiom an initial public 
offering that would start generating $2,500 in monthly income within a few weeks. 
In reality the 
Mobilier purchase was a  secured convertible promissory note related to bridge financing, and 
Mobilier was not publicly traded at  the time and would not be until approximately a year later. 
The customer never received any income from the purchase. Gross never disclosed the true 
nature of the investment, much less any of the associated risks. 
28. 
Gross similarly misled younger customers into high-risk investments, even when 
they clearly had conservative investment objectives. Promising tremendous rates of return, 
Gross convinced one couple in their late forties, with income and growth as their investment 
goals, to invest 75% of their portfolio and all of the equity in their home in four private 
placements and PIPES. Gross did not disclose the risks of the investments, or that his promises 
of high returns were baseless. 

29. 
At least seven of Gross' customers purchased more than $1.5 million in private 
placements and PIPES, each losing almost their entire investment. Meanwhile, Gross generated 
more than $75,000 personally in fees fiom those transactions. 
4. Gross' Misleading, Unsuitable Recommendations 
and Unauthorized Purchases of a Penny Stock 
30. 
During 2005 and 2006, Gross touted the penny stock of Vistula Communication 
Services, Inc. to his customers. 
Gross falsely told his customers Vistula stock was a  great 
investment because Vistula was the only 
firm marketing a voice-over-internet communication 
system. 
He disclosed none of the significant risks associated with Vistula, or the risks 
concerning investments in penny stocks in general, which include increased potential losses due 
to the speculative nature of penny stocks and their generally low trading volume. 
31. 
Gross bought large amounts of Vistula stock for his customers in purchases that 
were unsuitable for them due to their investment objectives and desire to minimize risk. He 
sometimes used margin to do so, and purchased the stock for customers' portfolios without prior 
authorization. 
32. 
For example, between July and October 2005, Gross concentrated almost half of 
one 69-year-old customer's portfolio in Vistula. Without telling the customer, he used margin to 
effect a portion of the Vistula purchases. This contradicted the customer's modest and low-risk 
investment objectives. When the customer realized she had bought Vistula stock on margin, she 
told Gross she did not want to do so. Gross told her it  was "nothing," and she should stop 
worrying. During 2005 and 2006, the customer's realized and unrealized losses from the Vistula 
purchases were more than $43,000. 
33. 
In another instance, in September and October 2005, for two married customers in 
their late seventies, Gross purchased more than 30,000 shares of Vistula stock without telling 

them. By June 2006, Vistula stock comprised approximately 15% of their account's net equity, 
despite their conservative investment objectives of income and growth with low risk. When the 
couple asked Gross why their account statement showed minus signs in the net debit balance, 
Gross groundlessly promised the Vistula stock would generate $150,000 for them within a few 
weeks. These customers, however, never received any payment and their unrealized losses in 
Vistula stock totaled more than 
$3 1,000 by the end of September 2006. 
34. 
Gross failed to give his customers any adverse information about Vistula, 
continuing instead to push the profit potential of Vistula's penny stock and offer baseless share 
price projections, often even as Vistula's stock price declined. 
35. In December 2005, Gross falsely told one customer her Vistula stock was worth 
almost twice the actual amount. In the fourth quarter of 2006, Gross left another customer a 
voice mail message baselessly saying she should be hearing "very positive" information from 
Vistula from that point forward, something that never happened. 
36. 
During the year Gross hyped Vistula to his customers, he failed to disclose there 
were other publicly held companies marketing, developing, and implementing a  voice-over- 
internet system, or that Vistula's stock price dropped by more than 50%. Additionally, Gross did 
not tell his customers that while he was purchasing Vistula stock for them, Vistula's public 
filings with the Commission disclosed the company's cash flow had declined and the company 
needed capital. 
37. Gross also never disclosed to his customers that Vistula's Form 10-QSB for the 
quarter ending June 2006 showed Vistula's net losses had almost doubled fiom the same period 
in 2005, it had prepared its financial statements on a going concern basis, and it had net losses of 
more than $7 million and a working capital deficit of more than $3 million. 

38. Gross bought 3 15,650 shares of Vistula stock worth approximately $508,052 for 
seven customers. By the end of September 2006, they collectively had lost 54% of their 
investment 
-about $274,564. 
B. Gross' Churning of Customer Accounts 
39. Gross also churned customer accounts, often treating non-discretionary accounts 
as if he had discretion over them, and using that control to churn the accounts. 
40. Turnover ratios measure the number of times per year new securities replace 
securities already in a customer's account. 
A turnover ratio of six or greater generally indicates 
that excessive trading has occurred. During the relevant time, the turnover ratios for at least four 
of Gross' customers' accounts ranged from six to nineteen. 
41. Breakeven analysis determines the rate of return an account must earn annually to 
cover transaction costs such as commissions. Trading practices that require an account to 
appreciate in excess of 20% to break even generally indicate excessive trading. The breakeven 
analysis for the same four customer accounts showed these customers would have had to realize 
annual returns of between 19% and 49% to break even. 
42. 
Gross often purchased and liquidated his customers' positions within a week, and 
sometimes in as little as two trading days. Gross often made these transactions without obtaining 
the customers' authorization. 
43. For example, between March and September 2006, Gross made 13 1 transactions 
in one 74 year-old customer's account. Gross' trading of funds and individual equities resulted 
in a  turnover rate of 11.1 for that period and an annualized turnover rate of 19. Gross never 
informed the customer of these trades, and failed to disclose that he used margin to effect many 
of the transactions. During this period, the account had a margin debit as high as $277'5 18 when 

the net equity of the account was only approximately $340,000. The customer ultimately lost 
approximately $350,000 due to Gross' churning and other misconduct. 
44. For two married customers in their sixties, with income and growth as their 
investment objectives, Gross made 230 transactions in their account from mid-2003 through 
January 2007, resulting in an annual turnover rate of 9.2. Many of these were unauthorized 
trades, and Gross additionally used margin without explaining the risks to the customers. He 
eventually drove their account's margin debt in August 2004 to approximately $399,000 
compared to net equity of only $292,894. When the customers discovered Gross' trading, the 
wife told Gross they did not want to invest on margin. Gross baselessly told her not to worry 
because she and her husband would get back the margin interest. However, due to Gross' 
churning and other misconduct, these customers lost at least $150,000. 
C. Fabricated Customer Account Values and Baseless Projections 
45. During 2005 and 2006, Gross created documents for several customers that 
misrepresented the value of their investments and contained baseless projections of future 
performance. Gross then orally reiterated these misrepresentations. 
46. 
In the fall of 2005, several customers expressed concern that their account 
statements reflected large investment losses. Gross' customers were also confused when they 
noticed that the private placements and PIPEs were listed on their account statements as either 
unpriced or restricted. 
In meetings with customers fi-om the fall of 2005 until late 2006, Gross 
resorted to misrepresenting the value of their accounts and providing baseless projections. 
47. 
In these meetings, Gross told his customers that their Axiom monthly account 
statements were not accurate. 
He claimed the account values were actually much higher, 
primarily because the value of the private placements and PIPEs were not reflected, or were 

improperly reflected, on their statements. Gross made unfounded handwritten notations on 
account statements and other documents adding the purported values of amounts invested in 
private placements, PIPEs, and Vistula stock to the account values on the statements. He falsely 
told the customers his handwritten calculations reflected the true value of their accounts. 
48. 
For example, in around June 2006, a married couple in their forties asked Gross 
why the balance on their Axiom statements was much lower than the amount they initially 
invested with Gross. Gross lied, telling them their account statement did not show the actual 
value of their investments because it  did not reflect the value of their investments in private 
placements and PIPEs. Gross wrote a list of the amounts they invested in each private placement 
and PIPE (totaling $418,000) and then wrote the figure $730,000, stating that this larger figure 
represented their actual account value. Finally, Gross also wrote the figure $948,000, and told 
his customers that in thirty or sixty days the value of their account would grow to that amount. 
49. Gross' representations were false and his projections were groundless. 
The 
customers' shares in the private placements and PIPEs were restricted and illiquid, making them 
far less valuable than he stated. There was no public information to support Gross' valuations or 
projections. 
50. 
Gross' representations to his customers of the value of their portfolios were 
baseless because the PIPEs 
and private placements generally involved restricted shares, which 
were illiquid. Additionally, Gross falsely represented Vistula stock was trading at  a much higher 
price than it sold for in actual trading. There was no information to support the higher value he 
used or even any projections the price would eventually rise as high as he indicated. 

,
COUNT I 

Fraud in Violation of Section 17(a)(l) of the Securities Act 

51. The Commission repeats and realleges Paragraphs 1 through 50 of this Complaint 
as if fully set forth herein. 
52. During the relevant time period, Gross, directly or indirectly, by use of the means 
or instruments of transportation or communication in interstate commerce or by use of the mails, 
in the offer or sale of securities, as described in this Complaint, knowingly, willfully or 
recklessly employed devices, schemes, or artifices to defi.aud. 
53. By reason of the foregoing, Gross has directly or indirectly violated and, unless 
enjoined, is reasonably likely to continue to violate, Section 17(a)(l) of the Securities Act, 15 
U.S.C. 
5 77q(a)(l). 
COUNT I1 

Fraud in Violation of Sections 17(a)(2) and 17(a)(3) of the Securities Act 

54. The Commission repeats and realleges Paragraphs 1 through 50 of this Complaint 
as if fully set forth herein. 
55. During the relevant time period, Gross, directly or indirectly, by use of the means 
or instruments of transportation or communication in interstate commerce or by the use of the 
mails, in the offer or sale of securities, as described in this Complaint: (a) obtained money or 
property by means of untrue statements of material facts and omissions to state material facts 
necessary to make statements made, in light of the circumstances under which they were made, 
not misleading; andlor 
(b) engaged in transactions, practices and courses of business which 
operated or would have operated as a fraud or deceit upon purchasers of securities. 

56. 
By reason of the foregoing, Gross has directly or indirectly violated and, unless 
enjoined, is reasonably likely to continue to violate, Sections 17(a)(2) and 17(a)(3) of the 
Securities Act, 15 U.S.C. 
5 77q(a)(2) and 77q(a)(3). 
COUNT I11 

Fraud in Violation of Section 10(b) of the Exchange Act and Rule lob-5 

57. 
The Commission repeats and realleges Paragraphs 1 through 50 of this Complaint 
as if fully set forth herein. 
58. 
During the relevant time period, Gross, directly or indirectly, by use of the means 
and instrumentality of interstate commerce or of the mails in connection with the purchase or 
sale of the securities, as described in this Complaint, knowingly, willfully or recklessly: (a) 
employed devices, schemes or artifices to defraud: 
(b) made untrue statements of material fact 
and omitted to state material facts necessary in order to make statements made, in light of the 
circumstances under which they were made, not misleading; and/or (c) engaged in acts, practices 
and courses of business which operated as a fiaud or deceit upon purchasers of such securities. 
59. 
By reason of the foregoing, Gross has directly or indirectly violated and, unless 
enjoined, is reasonably likely to continue to violate, Section lo@) of the Exchange Act, 15 
U.S.C. 
5 78j(b), and Rule lob-5, 17 C.F.R. 5 240.10b-5. 

RELIEF REOUESTED' 
WHEREFORE, the Commission respectfully requests that the Court: 
Declaratory Relief 
Declare, determine and find Gross committed the violations of the federal securities laws 
alleged in this Complaint. 
Permanent Iniunctive Relief 
Issue a  Permanent Injunction, restraining and enjoining Gross fi-om violating Section 
17(a) of the Securities Act, 15 U.S.C. 577q(a), and Section 100) of the Exchange Act, 15 U.S.C. 
5 
78j(b), and Rule lob-5, 17 C.F.R. 5 240.10b-5. 
Disgorgement and Preiudgment Interest 
Issue an Order directing Gross to disgorge all ill-gotten gains, including prejudgment 
interest, he received as a result of the acts or courses of conduct alleged in this Complaint. 
Civil Money Penalty 
Issue an Order directing Gross to pay a civil money penalty pursuant to Section 20(d) of 
the Securities Act, 15 U.S.C. 
5 77t(d), and Section 21(d) of the Exchange Act, 15 U.S.C. 5 
78u(d). 
1 
On November 21, 2007, Gross filed a pending Chapter 7 voluntary petition for bankruptcy in the United States 
Bankruptcy Court for the Southern District of Florida. 
In re Gav Jay Gross, Case No. 07-20281-BKC-PGH 
(Bankr. S.D. Fla.). Although the Commission's claims for disgorgement, prejudgment interest and penalties are 
non-dischargeable under Sections 523(a)(7) and (a)(19) of the Bankruptcy Code, the Commission has filed a proof 
of claim 
in Gross' bankruptcy case. This civil action brought by the Commission continues during Gross' pending 
bankruptcy case as 
an action by a governmental unit to enforce the Commission's police or regulatory power, in 
accordance with the exception to the automatic stay provided in Section 362(b)(4) of the Bankruptcy Code. Any 
monetary judgment entered against Gross 
in this civil action will be a non-dischargeable debt pursuant to Section 
523(a)(19) of the Bankruptcy Code, and the Commission will seek a finding to  that effect in this civil action. While 
the Commission seeks to eshblish the amount of disgorgement, plus prejudgment and post-judgment interest, and 
the amount of civil money penalty 
in this action, the Commission will pursue any enforcement of a money judgment 
against Gross, his bankruptcy estate or property of Gross' bankruptcy estate in accordance with the Bankruptcy 
Code and Rules. 

Penny Stock Bar 
Issue an Order prohibiting Gross from participating in any hture offering of a  penny 
stock security pursuant to Section 20(g) of the Securities Act, 15 U.S.C. 577t(g), and Section 
21(d)(6) of the Exchange Act, 15 U.S.C. $78u(d)(6). 
Further Relief 
Grant such other and further relief as may be necessary and appropriate. 
Retention of Jurisdiction 
Further, the Commission respectfully requests the Court retain jurisdiction over this 
action 
in order to implement and cany out the terms of all orders and decrees that may hereby be 
entered, or to entertain any suitable application or motion by the Commission for additional 
relief within the jurisdiction of this Court. 
Dated: September 22,2008. 
Scott A. Masel 
Senior Trial Counsel 
Fla. 
Bar No. 007 1 10 
rnasels@,sec.~ov 
Direct Dial: (305) 982-6398 
Elisha 
L. Frank 
Senior Counsel 
Fla. Bar No. 49689 
franke@,sec.gov 
Direct Dial: (305) 982-6392 
Attorneys for Plaintiff 
U.S. Securities and Exchange Commission 
801 Brickell Avenue, Suite 1800 
Miami, Florida 33 13 1 
Telephone: (305) 982-6300 
Facsimile: (305) 536-41 54 

UNITED STATES DISTRICT COURT 

SOUTHERN DISTRICT OF FLORIDA 


CASE NO.: 
08-81 039-CIV-MARRAIJOHNSON 

SECURITIES AND EXCHANGE 
COMMISSION, 

FILEDby IG D.C.
Plaintiff, ELECTRONIC 

v. 
SEPT 22,2008 

GARY J. GROSS, 
STEVEN M. LARIMORE 

CLERK U.S. OIST. CT. 

Defendant. S. 0. OF FLA. .MIAMI 

COMPLAINT 

Plaintiff Securities and Exchange Commission alleges: 

I. INTRODUCTION 

1. From at least early 2004 through approximately September 2006, Gary Gross, a 

former registered representative with broker-dealer Axiom Capital Management, Inc., defrauded 

several of his customers by making material misrepresentations and omissions about the risks 

and suitability of securities he bought for them, churning customer accounts, and fabricating 

customer account values. Many of Gross' victims were elderly Jewish investors who trusted 

Gross based on his statements that he was involved in the Jewish community and their perceived 

personal relationships with him. 

2. Gross persuaded many customers to open Axiom brokerage accounts and transfer 

existing accounts to Axiom by pledging he could deliver greater income from and safety in their 

investments than their current brokers. Once customers invested finds, Gross frequently 

disregarded their largely conservative investment objectives in favor of unsuitable mutual and 

closed-end finds without disclosing the associated risks. Gross also frequently churned his 



customers' accounts and made other unsuitable trades that benefited him at the expense of his 

customers. 

3. In 2005, Gross began purchasing risky, illiquid private placements and private 

investments in public equities in his customers' accounts. Gross emphasized the purported profit 

potential of these investments while failing to disclose their substantial risks. In late summer 

2005, Gross also began recommending and making purchases of a highly speculative penny 

stock for his customers - all contrary to their generally risk-averse investment objectives. 

4. Beginning in September 2005, when some customers complained about their 

losses and asked questions about their account statements, Gross again abused their trust and 

lied. He told them to ignore the account statements as inaccurate and created fi-audulent 

documents that misrepresented the actual value of their investments and sometimes included 

baseless projections. Through his misconduct, Gross generated substantial commissions and 

other fees, while many customers lost large amounts of their investments. While Gross reaped 

more than $700,000 in ill-gotten gains, his customers lost more than $2.7 million. 

5. By engaging in the conduct described above, and described more fully below, Gross 

violated Section 17(a) of the Securities Act of 1933 ("Securities Act"), 15 U.S.C. 8 77q(a); and 

Section lo@) and Rule lob-5 of the Securities Exchange Act of 1934 ("Exchange Act"), 15 U.S.C. 

8 78j@) and 17 C.F.R. 5 240.10b-5. Unless enjoined, Gross is reasonably likely to continue 

violating the securities laws. 

11. DEFENDANT AND RELEVANT ENTITY 

6. Gross, 56, is a resident of Far Rockaway, New York. From January 2003 through 

early January 2007, Gross lived in Boca Raton, Florida and was associated as a registered 

representative with Axiom in its Boca Raton branch office. Gross is the subject of more than 



twenty customer complaints filed with the Financial Industry Regulatory Authority in connection 

with his activities at Axiom. While Gross is not currently associated with a broker-dealer, he 

still maintains Series 7,63 and 65 securities licenses. 

7. Axiom is a Delaware corporation with its principal place of business in New 

York, New York. It has been registered with the Commission since June 22, 1990 as a broker- 

dealer. Axiom was also registered as an investment adviser from June 2004 through October 

2006. From December 2002 through early 2007, Axiom maintained its only branch office in 

Boca Raton. 

111. JURISDICTION AND VENUE 

8. This Court has jurisdiction over this action pursuant to Sections 20(b), 20(d), and 

22(a) of the Securities Act, 15 U.S.C. 55 77t(b), 77t(d), and 77v(a); and Sections 21(d), 21(e), 

21A and 27 of the ~ x c h a n ~ e  Act, 15 U.S.C. 55 78u(d), 78u(e), 78u-1 and 78aa. 

9. This Court has personal jurisdiction over Gross and venue is proper in the 

Southern District of Florida because Gross' acts, transactions, practices, and courses of conduct 

giving rise to the violations alleged in this Complaint occurred in the Southern District of 

Florida. Specifically, during the events alleged in the Complaint, Gross resided in the Southern 

District of Florida, and conducted business and engaged in the abusive sales practices described 

in this Complaint there. 

10. Gross, directly and indirectly, made use of the means and instrumentalities of 

interstate commerce, the means and instruments of transportation and communication in 

interstate commerce, and the mails, in connection with the acts, transactions, practices, and 

courses of conduct set forth in this Complaint. 



IV. FACTS 


11. From at least early 2004 through approximately September 2006 ("the relevant 

time"), Gross convinced customers to open accounts with him at Axiom or switch their 

brokerage accounts there. Many of Gross' customers often were elderly, unsophisticated 

investors, who wanted only to preserve their principal and grow their portfolio while investing 

with minimal risk. Instead of helping these people pursue their goals, Gross defrauded them by 

making materially misleading and unsuitable recommendations, engaging in unauthorized 

trading and churning, and giving them falsified and baseless account statements. 

A. Gross' Misleading and Unsuitable Recommendations and Unauthorized Purchases 

1. Misleading and Unsuitable Recommendations 

12. During the relevant time, Gross recommended placing, and placed, customers in 

mutual and closed-end funds, while failing to disclose the risks associated with those investments 

and their unsuitability for his customers' investment objectives. 

13. Once customers transferred their accounts to Axiom, Gross routinely liquidated 

substantial portions of their investments, often consisting of diversified, relatively low-risk 

securities such as conservative mutual funds, blue chip stocks and bonds, and replaced them with 

large concentrations of funds such as the Kelmoore Strategy Eagle Fund and another Kelmoore 

mutual fund. 

14. Gross failed to disclose to his customers the risk factors associated with Kelmoore 

funds, including Kelmoore Eagle's covered call option strategy and the volatility inherent in the 

mid-cap companies Kelmoore Eagle held, among other things. He failed to make these 

disclosures despite the fact that Kelmoore prospectuses discussed these risks and described an 

investment strategy contrary to that which Gross' customers sought. As discussed in more detail 



below, after investing heavily in Kelmoore, Gross made these unsuitable investments even less 

appropriate for his customers by liquidating them after only a short period, also in disregard of 

the Kelmoore prospectuses' recommendations. 

15. For example, one of Gross' customers was a 69-year-old retiree whose investment 

objectives were income and growth. In March and April 2005, Gross invested more than half of 

her portfolio in Kelmoore Eagle, telling her it provided good income and falsely stating there 

was no risk. In just six weeks, Gross purchased $575,000 of Kelmoore Eagle in her account. 

Gross liquidated the entire position 33 days later for a net loss of approximately $13,500, while 

generating approximately $1 5,000 in sales charges fiom these transactions. 

16. Gross' abusive activity was exacerbated by his practice of trading on margin in 

his customers' accounts. Gross used margin to effect larger purchases of unsuitable funds than 

his customers could have made had they not used margin. Gross never discussed margin trading 

with his customers prior to utilizing it in their accounts, and did not disclose the risks associated 

with margin, such as higher costs through interest payments and potentially increased losses. 

17. Further, while Gross promised his customers large monthly income payments, he 

failed to disclose the income they received fiom Kelmoore and other, similar funds was reduced 

by the margin interest charged. Gross told some of his customers not to worry about margin call 

letters they received, and directed them to throw the letters away. 

18. Gross also materially misled his customers about other unsuitable funds he 

pitched. For example, he recommended his customers invest in initial public offerings, even 

though these funds had no track record. He also recommended non-diversified funds such as 

those limited to a particular country. Gross failed to disclose to his customers the risks 

associated with these investments. 



2. Gross' Unauthorized Trading 

19. Additionally, Gross often conducted unauthorized trading on behalf of his 

customers. Although Gross did not have discretionary customer accounts, he often effected 

transactions in various securities without obtaining the customers' authorization. This trading 

usually cost his customers money but generated more than $500,000 in commissions for himself. 

20. For example, in the account of a 97-year-old customer, Gross made seventeen 

unauthorized buys of unsuitably risky funds between February and October 2006, purchasing an 

aggregate amount of $1,558,000. He falsely marked eight of those transactions as ones he did 

not solicit from the customer. During this same period, Gross made seven sales transactions in 

these funds, even though the customer had held them for less than two months, and even though 

the sale price was almost always the same as or lower than the purchase price. During those nine 

months, Gross generated approximately $40,000 in commissions from this trading in the 

customer's account. The customer's account lost $420,300 in net equity and was charged 

$46,000 in margin interest, while developing a margin debt of more than $675,000 by the end of 

November 2006. 

3. Misleading and Unsuitable Recommendations of Private Placements and PIPEs 

21. From early 2005 through approximately September 2006, Gross touted the 

purported profit potential of various private placements and investments known as PIPEs (private 

investments in public equities) to his customers. Gross told his customers the private placements 

and PPEs were riskless and the issuers were high-quality companies. Gross promised some 

customers they would be able to sell these investments within months and reap large profits. 

22. Gross, however, failed to disclose the risks accompanying these investments. For 

example, contrary to his representations, the companies were start-up ventures in search of 



fknding, with little or no track record. Gross also did not tell customers they would receive 

restricted stock they could not trade until the issuers' registration statements were declared 

effective. Additionally, Gross did not tell his customers that the issuers' registration statements 

could be delayed, and that customers would consequently be unable to convert their restricted 

shares into free-trading common stock within the time Gross promised. 

23. The private placements and PIPEs were unsuitable recommendations for at least 

four of Gross' customers who, in light of their need for low-risk and conservative investment 

objectives, could ill afford the risks associated with these speculative and illiquid securities. At 

least four of the customers Gross defrauded into investing in the private placements and PIPES 

were elderly and risk-averse, with limited annual income and an investment objective of income 

and growth. 

24. In the case of one elderly female customer, who had invested approximately 

$700,000 with Gross in 2005, Gross liquidated $500,000 of her portfolio to purchase private 

placement and PIPE offerings, and margined other parts of her portfolio for additional, similar 

investments during the spring and summer of 2005. In August 2005, in response to her concerns 

about the risky nature of the private placements and PIPEs, Gross told the customer her 

purchases were in high-quality companies guaranteed to make money. He also promised nothing 

could happen to her money with those investments, and if they did not work out he could return 

her money by selling her holdings to institutional clients. Gross never told her he was using 

margin for her purchases and never explained the risks or costs of margin. 

25. In December 2005, Gross further deflected the customer's concerns with 

fraudulent written calculations showing her $75,000 PIPE investment was worth $129,500. 



Gross based these calculations on a value of $3.50 per share, which was baseless because the 

free-trading stock of the company was, at most, $1.95 per share. 

26. In March 2006, Gross opened a new account for a couple in their late seventies. 

The husband suffered from mild dementia, and the wife handled most investment decisions by 

herself Without explaining the purpose, Gross convinced the customer to liquidate more than 

33% of the account's net equity, or approximately $250,000. Gross then used that money to buy 

a private placement in a company called Mobilier, Inc. without getting prior authorization for the 

purchase. 

27. When the customer received her statement in the spring of 2006, she called Gross 

for an explanation. Gross falsely told her he had purchased the shares fiom an initial public 

offering that would start generating $2,500 in monthly income within a few weeks. In reality the 

Mobilier purchase was a secured convertible promissory note related to bridge financing, and 

Mobilier was not publicly traded at the time and would not be until approximately a year later. 

The customer never received any income from the purchase. Gross never disclosed the true 

nature of the investment, much less any of the associated risks. 

28. Gross similarly misled younger customers into high-risk investments, even when 

they clearly had conservative investment objectives. Promising tremendous rates of return, 

Gross convinced one couple in their late forties, with income and growth as their investment 

goals, to invest 75% of their portfolio and all of the equity in their home in four private 

placements and PIPES. Gross did not disclose the risks of the investments, or that his promises 

of high returns were baseless. 



29. At least seven of Gross' customers purchased more than $1.5 million in private 

placements and PIPES, each losing almost their entire investment. Meanwhile, Gross generated 

more than $75,000 personally in fees fiom those transactions. 

4. Gross' Misleading, Unsuitable Recommendations 
and Unauthorized Purchases of a Penny Stock 

30. During 2005 and 2006, Gross touted the penny stock of Vistula Communication 

Services, Inc. to his customers. Gross falsely told his customers Vistula stock was a great 

investment because Vistula was the only firm marketing a voice-over-internet communication 

system. He disclosed none of the significant risks associated with Vistula, or the risks 

concerning investments in penny stocks in general, which include increased potential losses due 

to the speculative nature of penny stocks and their generally low trading volume. 

31. Gross bought large amounts of Vistula stock for his customers in purchases that 

were unsuitable for them due to their investment objectives and desire to minimize risk. He 

sometimes used margin to do so, and purchased the stock for customers' portfolios without prior 

authorization. 

32. For example, between July and October 2005, Gross concentrated almost half of 

one 69-year-old customer's portfolio in Vistula. Without telling the customer, he used margin to 

effect a portion of the Vistula purchases. This contradicted the customer's modest and low-risk 

investment objectives. When the customer realized she had bought Vistula stock on margin, she 

told Gross she did not want to do so. Gross told her it was "nothing," and she should stop 

worrying. During 2005 and 2006, the customer's realized and unrealized losses from the Vistula 

purchases were more than $43,000. 

33. In another instance, in September and October 2005, for two married customers in 

their late seventies, Gross purchased more than 30,000 shares of Vistula stock without telling 



them. By June 2006, Vistula stock comprised approximately 15% of their account's net equity, 

despite their conservative investment objectives of income and growth with low risk. When the 

couple asked Gross why their account statement showed minus signs in the net debit balance, 

Gross groundlessly promised the Vistula stock would generate $150,000 for them within a few 

weeks. These customers, however, never received any payment and their unrealized losses in 

Vistula stock totaled more than $3 1,000 by the end of September 2006. 

34. Gross failed to give his customers any adverse information about Vistula, 

continuing instead to push the profit potential of Vistula's penny stock and offer baseless share 

price projections, often even as Vistula's stock price declined. 

35. In December 2005, Gross falsely told one customer her Vistula stock was worth 

almost twice the actual amount. In the fourth quarter of 2006, Gross left another customer a 

voice mail message baselessly saying she should be hearing "very positive" information from 

Vistula from that point forward, something that never happened. 

36. During the year Gross hyped Vistula to his customers, he failed to disclose there 

were other publicly held companies marketing, developing, and implementing a voice-over- 

internet system, or that Vistula's stock price dropped by more than 50%. Additionally, Gross did 

not tell his customers that while he was purchasing Vistula stock for them, Vistula's public 

filings with the Commission disclosed the company's cash flow had declined and the company 

needed capital. 

37. Gross also never disclosed to his customers that Vistula's Form 10-QSB for the 

quarter ending June 2006 showed Vistula's net losses had almost doubled fiom the same period 

in 2005, it had prepared its financial statements on a going concern basis, and it had net losses of 

more than $7 million and a working capital deficit of more than $3 million. 



38. Gross bought 3 15,650 shares of Vistula stock worth approximately $508,052 for 

seven customers. By the end of September 2006, they collectively had lost 54% of their 

investment -about $274,564. 

B. Gross' Churning of Customer Accounts 

39. Gross also churned customer accounts, often treating non-discretionary accounts 

as if he had discretion over them, and using that control to churn the accounts. 

40. Turnover ratios measure the number of times per year new securities replace 

securities already in a customer's account. A turnover ratio of six or greater generally indicates 

that excessive trading has occurred. During the relevant time, the turnover ratios for at least four 

of Gross' customers' accounts ranged from six to nineteen. 

41. Breakeven analysis determines the rate of return an account must earn annually to 

cover transaction costs such as commissions. Trading practices that require an account to 

appreciate in excess of 20% to break even generally indicate excessive trading. The breakeven 

analysis for the same four customer accounts showed these customers would have had to realize 

annual returns of between 19% and 49% to break even. 

42. Gross often purchased and liquidated his customers' positions within a week, and 

sometimes in as little as two trading days. Gross often made these transactions without obtaining 

the customers' authorization. 

43. For example, between March and September 2006, Gross made 13 1 transactions 

in one 74 year-old customer's account. Gross' trading of funds and individual equities resulted 

in a turnover rate of 11.1 for that period and an annualized turnover rate of 19. Gross never 

informed the customer of these trades, and failed to disclose that he used margin to effect many 

of the transactions. During this period, the account had a margin debit as high as $277'5 18 when 



the net equity of the account was only approximately $340,000. The customer ultimately lost 

approximately $350,000 due to Gross' churning and other misconduct. 

44. For two married customers in their sixties, with income and growth as their 

investment objectives, Gross made 230 transactions in their account from mid-2003 through 

January 2007, resulting in an annual turnover rate of 9.2. Many of these were unauthorized 

trades, and Gross additionally used margin without explaining the risks to the customers. He 

eventually drove their account's margin debt in August 2004 to approximately $399,000 

compared to net equity of only $292,894. When the customers discovered Gross' trading, the 

wife told Gross they did not want to invest on margin. Gross baselessly told her not to worry 

because she and her husband would get back the margin interest. However, due to Gross' 

churning and other misconduct, these customers lost at least $150,000. 

C. Fabricated Customer Account Values and Baseless Projections 

45. During 2005 and 2006, Gross created documents for several customers that 

misrepresented the value of their investments and contained baseless projections of future 

performance. Gross then orally reiterated these misrepresentations. 

46. In the fall of 2005, several customers expressed concern that their account 

statements reflected large investment losses. Gross' customers were also confused when they 

noticed that the private placements and PIPEs were listed on their account statements as either 

unpriced or restricted. In meetings with customers fi-om the fall of 2005 until late 2006, Gross 

resorted to misrepresenting the value of their accounts and providing baseless projections. 

47. In these meetings, Gross told his customers that their Axiom monthly account 

statements were not accurate. He claimed the account values were actually much higher, 

primarily because the value of the private placements and PIPEs were not reflected, or were 



improperly reflected, on their statements. Gross made unfounded handwritten notations on 

account statements and other documents adding the purported values of amounts invested in 

private placements, PIPEs, and Vistula stock to the account values on the statements. He falsely 

told the customers his handwritten calculations reflected the true value of their accounts. 

48. For example, in around June 2006, a married couple in their forties asked Gross 

why the balance on their Axiom statements was much lower than the amount they initially 

invested with Gross. Gross lied, telling them their account statement did not show the actual 

value of their investments because it did not reflect the value of their investments in private 

placements and PIPEs. Gross wrote a list of the amounts they invested in each private placement 

and PIPE (totaling $418,000) and then wrote the figure $730,000, stating that this larger figure 

represented their actual account value. Finally, Gross also wrote the figure $948,000, and told 

his customers that in thirty or sixty days the value of their account would grow to that amount. 

49. Gross' representations were false and his projections were groundless. The 

customers' shares in the private placements and PIPEs were restricted and illiquid, making them 

far less valuable than he stated. There was no public information to support Gross' valuations or 

projections. 

50. Gross' representations to his customers of the value of their portfolios were 

baseless because the PIPEs and private placements generally involved restricted shares, which 

were illiquid. Additionally, Gross falsely represented Vistula stock was trading at a much higher 

price than it sold for in actual trading. There was no information to support the higher value he 

used or even any projections the price would eventually rise as high as he indicated. 



,
COUNT I 


Fraud in Violation of Section 17(a)(l) of the Securities Act 


51. The Commission repeats and realleges Paragraphs 1 through 50 of this Complaint 

as if fully set forth herein. 

52. During the relevant time period, Gross, directly or indirectly, by use of the means 

or instruments of transportation or communication in interstate commerce or by use of the mails, 

in the offer or sale of securities, as described in this Complaint, knowingly, willfully or 

recklessly employed devices, schemes, or artifices to defi.aud. 

53. By reason of the foregoing, Gross has directly or indirectly violated and, unless 

enjoined, is reasonably likely to continue to violate, Section 17(a)(l) of the Securities Act, 15 

U.S.C. 5 77q(a)(l). 

COUNT I1 


Fraud in Violation of Sections 17(a)(2) and 17(a)(3) of the Securities Act 


54. The Commission repeats and realleges Paragraphs 1 through 50 of this Complaint 

as if fully set forth herein. 

55. During the relevant time period, Gross, directly or indirectly, by use of the means 

or instruments of transportation or communication in interstate commerce or by the use of the 

mails, in the offer or sale of securities, as described in this Complaint: (a) obtained money or 

property by means of untrue statements of material facts and omissions to state material facts 

necessary to make statements made, in light of the circumstances under which they were made, 

not misleading; andlor (b) engaged in transactions, practices and courses of business which 

operated or would have operated as a fraud or deceit upon purchasers of securities. 



56. By reason of the foregoing, Gross has directly or indirectly violated and, unless 

enjoined, is reasonably likely to continue to violate, Sections 17(a)(2) and 17(a)(3) of the 

Securities Act, 15 U.S.C. 5 77q(a)(2) and 77q(a)(3). 

COUNT I11 


Fraud in Violation of Section 10(b) of the Exchange Act and Rule lob-5 


57. The Commission repeats and realleges Paragraphs 1 through 50 of this Complaint 

as if fully set forth herein. 

58. During the relevant time period, Gross, directly or indirectly, by use of the means 

and instrumentality of interstate commerce or of the mails in connection with the purchase or 

sale of the securities, as described in this Complaint, knowingly, willfully or recklessly: (a) 

employed devices, schemes or artifices to defraud: (b) made untrue statements of material fact 

and omitted to state material facts necessary in order to make statements made, in light of the 

circumstances under which they were made, not misleading; and/or (c) engaged in acts, practices 

and courses of business which operated as a fiaud or deceit upon purchasers of such securities. 

59. By reason of the foregoing, Gross has directly or indirectly violated and, unless 

enjoined, is reasonably likely to continue to violate, Section lo@) of the Exchange Act, 15 

U.S.C. 5 78j(b), and Rule lob-5, 17 C.F.R. 5 240.10b-5. 



RELIEF REOUESTED' 

WHEREFORE, the Commission respectfully requests that the Court: 

Declaratory Relief 

Declare, determine and find Gross committed the violations of the federal securities laws 

alleged in this Complaint. 

Permanent Iniunctive Relief 

Issue a Permanent Injunction, restraining and enjoining Gross fi-om violating Section 

17(a) of the Securities Act, 15 U.S.C. 577q(a), and Section 100) of the Exchange Act, 15 U.S.C. 5 

78j(b), and Rule lob-5, 17 C.F.R. 5 240.10b-5. 

Disgorgement and Preiudgment Interest 

Issue an Order directing Gross to disgorge all ill-gotten gains, including prejudgment 

interest, he received as a result of the acts or courses of conduct alleged in this Complaint. 

Civil Money Penalty 

Issue an Order directing Gross to pay a civil money penalty pursuant to Section 20(d) of 

the Securities Act, 15 U.S.C. 5 77t(d), and Section 21(d) of the Exchange Act, 15 U.S.C. 5 

78u(d). 

1 On November 21, 2007, Gross filed a pending Chapter 7 voluntary petition for bankruptcy in the United States 
Bankruptcy Court for the Southern District of Florida. In re Gav Jay Gross, Case No. 07-20281-BKC-PGH 
(Bankr. S.D. Fla.). Although the Commission's claims for disgorgement, prejudgment interest and penalties are 
non-dischargeable under Sections 523(a)(7) and (a)(19) of the Bankruptcy Code, the Commission has filed a proof 
of claim in Gross' bankruptcy case. This civil action brought by the Commission continues during Gross' pending 
bankruptcy case as an action by a governmental unit to enforce the Commission's police or regulatory power, in 
accordance with the exception to the automatic stay provided in Section 362(b)(4) of the Bankruptcy Code. Any 
monetary judgment entered against Gross in this civil action will be a non-dischargeable debt pursuant to Section 
523(a)(19) of the Bankruptcy Code, and the Commission will seek a finding to that effect in this civil action. While 
the Commission seeks to eshblish the amount of disgorgement, plus prejudgment and post-judgment interest, and 
the amount of civil money penalty in this action, the Commission will pursue any enforcement of a money judgment 
against Gross, his bankruptcy estate or property of Gross' bankruptcy estate in accordance with the Bankruptcy 
Code and Rules. 



Penny Stock Bar 

Issue an Order prohibiting Gross from participating in any hture offering of a penny 

stock security pursuant to Section 20(g) of the Securities Act, 15 U.S.C. 577t(g), and Section 

21(d)(6) of the Exchange Act, 15 U.S.C. $78u(d)(6). 

Further Relief 

Grant such other and further relief as may be necessary and appropriate. 

Retention of Jurisdiction 

Further, the Commission respectfully requests the Court retain jurisdiction over this 

action in order to implement and cany out the terms of all orders and decrees that may hereby be 

entered, or to entertain any suitable application or motion by the Commission for additional 

relief within the jurisdiction of this Court. 

Dated: September 22,2008. 

Scott A. Masel 
Senior Trial Counsel 
Fla. Bar No. 007 1 10 
rnasels@,sec.~ov 
Direct Dial: (305) 982-6398 

Elisha L. Frank 
Senior Counsel 
Fla. Bar No. 49689 
franke@,sec.gov 
Direct Dial: (305) 982-6392 

Attorneys for Plaintiff 
U.S. Securities and Exchange Commission 
801 Brickell Avenue, Suite 1800 
Miami, Florida 33 13 1 
Telephone: (305) 982-6300 
Facsimile: (305) 536-41 54