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CMKM Diamond fraud case yields $55 million judgment

The federal government won a judgment against a key defendant in the CMKM Diamond stock fraud case for $55 million, but a source close to the case said the defendant’s whereabouts is unknown.

U.S. District Judge Larry Hicks on Tuesday signed a summary judgment order against four defendants in the Securities and Exchange Commission lawsuit against CMKM Diamonds, a penny stock company that had no legitimate business. Defendants in the case sold most of the worthless stock through a Las Vegas brokerage, causing 40,000 investors to lose a total of $64 million, according to the court order.

The judge issued a summary judgment against John Edwards; Daryl Anderson, a stockbroker at now-closed NevWest Securities Corp. of Las Vegas; and Kathleen and Anthony Tomasso of Florida who sold 77.3 billion shares of CMKM stock to five companies the Tomassos owned.

The four defendants consented to the summary judgment without admitting or denying any liability. It’s not clear whether the government will recover any of the judgments against the defendants or, if it does, whether any of the recovered money will be shared with victims.

The scheme started when Edwards did a reverse merger between his public company, CMKM, and several private Canadian companies controlled by Urban Casavant, according to the order.

Casavant was chief executive and chairman of CMKM while Edwards, using the alias Ian McIntyre, was director of post-term matters.

CMKM, whose “only activities were illegally issuing and promoting its own stock,” increased its outstanding shares to 800 billion from 500 million, the court papers said. CMKM shares were traded over-the-counter for prices ranging from one-tenth to one-hundredth of a cent.

CMKM gave investors “phony maps and fabricated videos” of alleged gold and diamond mines, according to the order.

“This involved writing false opinion letters (about the stock), issuing false press releases, populating Internet message boards with false information and operating a promotional motorbike, truck and ‘funny car’ racing team, which traveled throughout the country promoting the CMKM brand,” the order said.

Many victims were NASCAR race fans.

“In reality, the company financed gambling debts, personal real estate investments, lavish lifestyles and had no operations beyond Casavant’s Las Vegas residence,” the papers said.

The scheme continued from January 2003 to May 2005.

Anderson sold 260 billion shares of stock in 569 transactions for $53.3 million.

“At this point in time, (Anderson) didn’t think it was worth it to fight the claims,” said defense attorney Doug Griffith of Salt Lake City. Griffith doubted his client could satisfy the $4.8 million judgment, which includes disgorgement of “ill-gotten gains,” prejudgment interest and a civil penalty.

A summary judgment of $1.4 million was entered against the Tomassos.

Of the four, Edwards faces the largest judgment, a total of $55 million. A source said authorities no longer know Edwards’ whereabouts. Molly White, a Securities and Exchange Commission attorney assigned to the CMKM case, declined to comment on whether Edwards is missing.

The four defendants have 10 days to make payments before the government will start efforts to recover the judgments.

The judge enjoined the four defendants against similar securities law violations in the future.

Default orders have been issued against Casavant, NevWest and two other defendants. Civil litigation continues against Sergey Rumyantsev and Anthony Santos, who owned stakes in Nevwest, and three other defendants.

Contact reporter John G. Edwards at jedwards@reviewjournal.com or 702-383-0420.

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