After anSEC lawsuit was announced yesterday JBII tumbled. After yesterdays close JBII responded (post below) and today the stock soared almost 50%
U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 22220 / January 4, 2012
Accounting and Auditing Enforcement Release No. 3352 / January 4, 2012
Securities and Exchange Commission v. JBI, Inc., John Bordynuik and Ronald Baldwin, Jr., Civil Action No. 1:12-cv-10012, United States District Court, District of Massachusetts
SEC CHARGES COMPANY AND ITS OFFICERS WITH ACCOUNTING FRAUD
The Securities and Exchange Commission announced today that it filed an action in federal court in Massachusetts against JBI, Inc., a publicly-traded company formerly located in Massachusetts and now headquartered in Ontario, Canada. The Commission also charged JBI’s current CEO, John Bordynuik, a resident of Ontario, Canada, and its former CFO, Ronald Baldwin, Jr, a resident of Palm Harbor, Florida. The action alleges that the defendants engaged in a scheme to commit securities and accounting fraud by reporting materially false and inaccurate financial information on the financial statements of JBI, Inc. for two reporting periods during 2009.
According to the Commission’s complaint, JBI is purportedly a technology company focused on data restoration and recovery and environmentally engineered product development. The company is headquartered in Canada, but purportedly has operations in New York, Florida, Ohio, and Pennsylvania. The complaint alleges that JBI is purportedly also involved in the research and development of a process designed to convert plastic waste into oil, known as “Plastic2Oil” or “P2O”. The Commission alleges that during the third quarter of 2009 and the year end 2009, JBI materially overstated certain assets in an effort to bolster its balance sheet and success in two private capital raising efforts (Private Investment in Public Equity or PIPES) geared toward raising the capital necessary to begin commercial operation and production of P2O. The Complaint alleges that JBI raised over $8.4 million for the company in these PIPES just before the company issued a public statement indicating its financial statements could no longer be relied upon, in part, due to the erroneous valuation of certain assets, known as media credits, on the balance sheet.
The Commission alleges that in contravention of Generally Accepted Accounting Principles (“GAAP”), the company erroneously booked the media credits at a value of $9.997 million, thereby becoming the single largest asset on the company’s balance sheet, when they should have been initially booked at a value of $1,000,000 when acquired in August 2009, and subsequently, the media credits should have been remeasured at their current value and written down to zero as of the end of the company’s third fiscal quarter on September 30, 2009. According to the complaint, Bordynuik was aware of, or was reckless in not being aware of, GAAP concerns surrounding the reported value of the media credits in advance of the company’s third quarter 2009 Form 10-Q filing with the Commission on November 16, 2009 and the year end 2009 Form 10-K filing with the Commission on March 31, 2010 yet falsely certified that the company’s financial statements for those reporting periods were filed in conformity with GAAP. The Commission complaint further alleges that Baldwin was aware of, or was reckless in not being aware of, GAAP concerns surrounding the reported value of the media credits in advance of the company’s year-end 2009 10-K filing on March 31, 2010, yet falsely certified that the company’s financial statements for that period were filed in conformity with GAAP.
THOROLD, Ontario, Jan 4, 2012 (GlobeNewswire via COMTEX) -- JBI, Inc. (the "Company") (OTCQX:JBII) is profoundly disappointed by the erroneous allegations of fraud contained in the civil lawsuit filed by the Securities Exchange Commission ("SEC") earlier today. The Company regrets that its attempts to negotiate settlement of this dispute failed, and, in consultation with its litigation counsel and Board of Directors, looks forward to vigorously defending itself in court, where the Company believes it will prevail on the merits.
The allegations in the complaint concern legacy accounting issues that have since been corrected. Among other things, since restating its financial statements, the Company has hired a new chief financial officer and engaged additional experienced accounting staff as well as a reputable independent audit firm.
Contrary to the allegations made by the SEC, the Company believes that its officers acted in good faith in valuing the media credits discussed in the complaint, based on the information available at the time. The Company further maintains that after learning of potential problems relating to these credits, it took appropriate steps in compliance with its obligations to shareholders and the public markets at large.
JBI, Inc. is acutely aware of its responsibility to its shareholders and values the trust shareholders put in the Company. The defense of this lawsuit will further demonstrate the Company's commitment to transparency and ethical business practices.
The Company is proud of its recent successes and will continue to focus on building out its business growth plan with its corporate partners.
About JBI, Inc.