ST-GBOE Complaint AMENDED

Case 4:10-cv-02380-HEA Document 5 Filed 01/04/11 Page 1 of 36
UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF MISSOURI
EASTERN DIVISION
Scottrade, Inc., )
)
Plaintiff, )
)
v. ) Case No. 4:10-cv-2380 HEA
)
GeoBio Energy, Inc., )
David Otto, )
David Sims, )
)
Primary Defendants, )
)
-and- )
)
Knight Equity Markets, L.P., )
)
Defendant and Relief Defendant, )
)
-and- )
)
UBS Securities, LLC, )
)
Serve on: Corporation Service Company )
2711 Center Ville Road, Suite 400 )
Wilmington, DE 19808 )
)
Penson Financial Services, Inc., )
)
Serve on: Penson Financial Services, Inc. )
150 Fayetteville St., Box 1011 )
Raleigh, NC 27601 )
)
National Financial Services, LLC, )
)
Serve on: The Corporation Trust Company )
Corporation Trust Center )
1209 Orange Street )
)
Pershing, LLC, )
)
Serve on: Pershing LLC )

100 White Clay Center, Suite 102 )
Newark, DE 19711 )
)
E*Trade Clearing, LLC, )
)
Serve on: Corporation Service Company )
2711 Center Ville Road, Suite 400 )
)
Vanguard Marketing Corporation, )
)
Serve on: Vanguard Marketing Corporation )
100 Vanguard Blvd. )
Malvern, PA 19355 )
)
Relief Defendants. )
FIRST AMENDED COMPLAINT
For its first amended complaint, Plaintiff, Scottrade, Inc. (―Scottrade‖) states as follows:
I. Introduction
1. This is an action (a) for injunctive relief to protect Scottrade and other
participants in the ―Pink Sheets‖ market for common shares of Defendant GeoBio Energy, Inc.
(―GeoBio‖) from incurring further damage from an ongoing scheme to manipulate the market
price of those shares in violation of the federal securities laws, (b) to secure other equitable relief
in the nature of the rescission of certain transactions in GeoBio shares effected on December 6,
2010 pursuant to obviously mistaken sale orders issued by Scottrade and partially executed by
Defendant/Relief Defendant Knight Equity Markets, L.P. (―Knight‖) while the manipulative
scheme was ongoing, and (c) for damages incurred in consequence of the manipulative scheme.
2. On December 6, 2010, as a result of a clerical error in recording the effects of an
announced reverse stock split of GeoBio shares, Scottrade mistakenly communicated to Knight
-2-
and Relief Defendant UBS Securities, LLC (―UBS‖) orders to sell more than 3 billion GeoBio
shares on behalf of certain Scottrade customers.
3. When Scottrade mistakenly communicated those sale orders, less than 2.5 million
GeoBio shares were issued and outstanding. And Scottrade is informed and believes that only
about 600,000 issued and outstanding GeoBio shares were registered for public trading or
otherwise legally publicly traded. The minimum sale price specified in many of the mistaken
GeoBio sells orders was only a small fraction of the price at which GeoBio shares had last
traded. Consequently, Knight and UBS knew or should have known that the mistaken GeoBio
sell orders Scottrade routed to them on December 6, 2010 were clearly erroneous and the result
of a mistake on Scottrade’s part.
4. Within 15 minutes of communicating the mistaken GeoBio sell orders to Knight
and UBS, Scottrade realized its mistake and notified Knight and UBS that it was cancelling its
mistaken orders.
5. Knight thereafter informed Scottrade that before Scottrade realized its mistake
and cancelled the mistaken GeoBio sell orders, Knight had filled orders for the sale of over 3
million GeoBio shares, and UBS informed Scottrade it had already filled orders for the sale of
over 16 million GeoBio shares.
6. In addition to promptly notifying Knight and UBS of its mistaken GeoBio sell
orders, Scottrade promptly undertook other corrective actions, including negotiating with
counter-parties to the mistaken GeoBio sell orders to rescind or ―bust‖ the mistaken trades and,
when the counter-parties notified Scottrade they would not agree to do so, Scottrade placed
orders in an effort to buy (back) the nearly 19 million GeoBio common shares UBS and Knight
informed Scottrade had already been sold.
-3-
7. Scottrade’s mistake played into the hands of GeoBio, its insiders and their
confederates, who are apparently engaged in a sophisticated variant of the classic ―pump and
dump‖ scheme to manipulate upwards the share price of GeoBio common stock and thereby
unjustly enrich themselves at the expense of Scottrade and other market participants.
8. GeoBio’s shares have no intrinsic value. Specifically, GeoBio has disclosed in
footnotes to its most recently published financial statements that it ―has a working capital deficit
. . . of approximately $1.9 million,‖ ―limited cash and other assets,‖ insufficient cash ―to enable
[it] to execute [its] business strategy‖ and ―substantial doubt about [its] ability to continue as a
going concern.‖ GeoBio’s most recently published financial statements show that as of June 30,
2010, it had no assets other than $29,000 in cash and $100,000 in prepaid expenses, but current
liabilities exceeding $2 million. Additionally, GeoBio’s most recently published financial
statements suggest the company is insolvent—with current liabilities that are approximately five
times greater than its total assets.
9. Nevertheless, GeoBio’s control persons continue to cause the Company to publish
press releases calculated to create the false impression that GeoBio is a legitimate, active
business with substantial prospects for acquiring and developing profitable business enterprises,
thereby ―pumping‖ the market price of GeoBio shares.
10. The concurrence of Scottrade’s mistake and the ongoing manipulative scheme has
caused the share price of GeoBio common stock to skyrocket and fluctuate wildly. Transactions
in GeoBio shares reported after the reverse stock split was effected have been executed at prices
as low as less than ½ cent per share and as high as $1.15 per share. The confluence of these
events has destabilized the market for GeoBio shares, and many reported transactions cannot be
settled by delivery of shares in the ordinary course.
-4-
11. Unless this Court restrains and enjoins the buy-in process set in motion by
successive failures to deliver GeoBio shares in settlement of reported post-split transactions, the
Primary Defendant’s manipulative scheme will succeed, the market for GeoBio shares will be
further destabilized, and the Primary Defendants will be further unjustly enriched at the expense
of Scottrade and other market participants.
12. To prevent that outcome, Scottrade seeks: (a) an injunction forbidding Knight and
the other Relief Defendants from purchasing GeoBio shares pursuant to ―buy-in‖ notices while
Scottrade’s claim for rescission remains pending, (b) a judgment rescinding all still unsettled
transactions in GeoBio shares between Scottrade and Knight executed between 11:05 a.m.
(Central Standard Time) and 11:18 a.m. (Central Standard Time) on December 6, 2010, and (c)
an award of damages against the Primary Defendants to compensate Scottrade for the costs of
correcting mistaken orders at prices attributable to the Primary Defendants’ manipulative
scheme.
II. Jurisdiction and Venue
13. This Court has jurisdiction over this action and the Primary Defendants pursuant
to 15 U.S.C. § 78aa in that (a) the case involves violations of the federal securities laws,
particularly Section 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. § 78j(b) and Rule
10b-5, 17 C.F.R. § 240.10-b(5), and (b) certain of the acts and transactions constituting the
violation occurred in this District.
14. This Court also has subject matter jurisdiction over this action pursuant to 28
U.S.C. §§ 1331, 1332 and 1337, in that (a) the case arises under a federal statute regulating
interstate commerce, and (b) the matter in controversy exceeds the sum or value of $75,000,
exclusive of interest and costs, and is between citizens of different states.
-5-
15. Venue is proper in this District pursuant to 15 U.S.C. § 78aa and 28 U.S.C. §
1391(b)(2), in that a substantial part of the events giving rise to the claim occurred in this
District.
16. This Court has personal jurisdiction over Knight because Knight is registered in
Missouri as a broker-dealer of securities, and this action arises out of Knight’s business as a
securities broker-dealer.
17. This Court has personal jurisdiction over Penson Financial Services, Inc.
(―Penson‖) because Penson is registered in Missouri as a broker-dealer of securities, and this
action arises out of Penson’s business as a securities broker-dealer.
18. This Court has personal jurisdiction over UBS Securities, LLC (―UBS‖) because
UBS is registered in Missouri as a broker-dealer of securities, and this action arises out of UBS’s
business as a securities broker-dealer.
19. This Court has personal jurisdiction over National Financial Services, LLC
(―NFS‖) because NFS is registered in Missouri as a broker-dealer of securities, and this action
arises out of NFS’s business as a securities broker-dealer.
20. This Court has personal jurisdiction over Pershing, LLC (―Pershing‖) because
Pershing is registered in Missouri as a broker-dealer of securities, and this action arises out of
Pershing’s business as a securities broker-dealer.
21. This Court has personal jurisdiction over E*Trade Clearing, LLC (―E*Trade‖)
because E*Trade is registered in Missouri as a broker-dealer of securities, and this action arises
out of E*Trade’s business as a securities broker-dealer.
-6-
22. This Court has personal jurisdiction over Vanguard Marketing Corporation
(―Vanguard‖) because Vanguard is registered in Missouri as a broker-dealer of securities, and
this action arises out of Vanguard’s business as a securities broker-dealer.
III. The Parties
23. Scottrade is an online broker-dealer of securities. It is a corporation organized
under the laws of the State of Arizona and has its corporate headquarters and principal place of
business in St. Louis, Missouri.
24. Primary Defendant GeoBio is a corporation organized under the laws of Colorado
having its principal offices and place of business in Atlanta, Georgia. Its common shares are
traded in the ―Pink Sheets‖ over-the-counter market for securities. While GeoBio from time–to–
time files reports with the United States Securities and Exchange Commission (the ―SEC‖) on
Forms 10-K, 10-Q, 8-K and Schedule 14 –C, such reports have often been untimely, and the
information provided in the reports has generally been, at best, incomplete. GeoBio has not yet
filed with the SEC an annual report with audited financial statements for 2010. That report was
due on December 29, 2010, i.e., within 90 days of the close of GeoBio’s 2010 fiscal year. On
January 3, 2011, GeoBio filed a Notification of Late Filing for GeoBio’s 2010 fiscal year annual
report. According to that filing (for which Defendant David M. Otto is listed as the contact
person) GeoBio was unable to provide its accountants with the requisite information to prepare
the report in a timely manner.
25. Defendant David M. Otto (―Otto‖) is a citizen residing in the State of Washington
and an attorney licensed to practice law in the State of New York and the State of Washington
who has acted as securities counsel to various issuers of publicly traded securities.
-7-
26. In a Complaint filed July 13, 2009, the SEC alleged that Otto and several others
acting in concert with him perpetrated a fraudulent ―pump and dump‖ scheme. See Securities
and Exchange Commission v. David M. Otto, Todd van Siclen, MitoPharm Corporation, Pak
Peter Cheung, Wall Street PR, Inc., and Charles Bingham, Case No. 2:09-cv-00960 RAJ and
Litigation Release No. 21126/July 13, 2009 available at
http://www.sec.gov/litigation/litreleases/2009/lr21126.htm. According to the SEC, Otto
employed a convertible promissory note and ―reverse stock split‖ to secretly accumulate shares
of MitoPharm Corporation, ostensibly a developer of anti-aging products. Otto and his
confederates then allegedly used a series of misleading press releases and internet Web profiles
to tout purported beverages and nutritional supplements of MitoPharm that were not available as
advertised to artificially inflate MitoPharm’s share price before ―Otto dumped his shares on an
unsuspecting market, reaping more than $1 million in illicit profits.‖ The SEC seeks injunctive
relief, disgorgement, financial penalties and an order barring Otto from participating in any
future penny stock offerings. The SEC’s Complaint is annexed as Exhibit 1.
27. David Sims is an individual. Scottrade is informed (from various published
reports of manipulative schemes involving securities issued by persons other than GeoBio) and
believes that Sims is a citizen of South Africa and resident of Tortola in the British Virgin
Islands. Sims has been implicated in a variety of schemes involving fraud and market
manipulation related to publicly traded companies. See, e.g., Hyperdynamics Corporation v.
Southridge Capital Management, LLC, No. A10A0362, 699 S.E.2d 456, 461 (Ga. Ct. App. July
16, 2010) (holding that a Georgia trial court has personal jurisdiction over David Sims and his
confederates in a lawsuit arising from conspiracy to engage in ―fraud and market manipulation
-8-
involving toxic convertible financing transactions with companies seeking private placement
investors‖).
28. Knight is a securities broker-dealer. It is a limited partnership organized under
the laws of the State of Delaware, and has its headquarters and principal place of business in
Jersey City, New Jersey. Knight’s general partner, Knight Securities General, Inc., is a
corporation organized under Delaware law having its principal offices and place of business in
New Jersey. Knight’s limited partner, Knight Securities Operations, Inc., is likewise a
corporation organized under Delaware law having its headquarters and principal place of
business in New Jersey. Neither Knight nor its partners are citizens of Missouri or Arizona.
Knight is a market maker for the common shares of GeoBio, and one of the leading market
makers, if not the leading market maker, for ―Pink Sheets‖ stocks generally.
29. Penson is a securities broker-dealer. It is North Carolina corporation with its
principal place of business in Texas. It is not a citizen of Missouri or Arizona.
30. UBS Securities is a securities broker-dealer. It is a limited liability corporation
organized under Delaware law with its principal places of business in New York and
Connecticut. The members of UBS Securities are UBS Americas, Inc. and UBS AG. UBS
Americas, Inc. is a corporation organized under Delaware law with its principal place of business
in Connecticut. UBS AG is a Swiss corporation with its principal place of business in
Switzerland. Neither UBS Securities nor its members are citizens of Missouri or Arizona.
31. NFS is a securities broker-dealer. It is a limited liability corporation organized
under Delaware law with its principal place of business in Massachusetts. NFS’s sole member,
Fidelity Global Brokerage Group, Inc., is a corporation organized under Massachusetts law with
-9-
its principal place of business in Massachusetts. Neither NFS nor its sole member are citizens of
Missouri or Arizona.
32. Pershing is a securities broker-dealer. It is a limited liability corporation
organized under Delaware law with its principal place of business in New Jersey. Pershing’s
sole member, Pershing Group, LLC, is likewise a limited liability corporation organized under
Delaware law with its principal place of business believed to be in New Jersey. Pershing Group,
LLC’s sole member, The Bank of New York Mellon Corporation, is a corporation organized
under Delaware law with its principal place of business in New York. Neither Pershing nor its
members are citizens of Missouri or Arizona.
33. E*Trade is a securities broker-dealer. It is a limited liability corporation
organized under Delaware law with its principal place of business in New Jersey. E*Trade’s
sole member, E*Trade Financial Corporation, is a corporation organized under Delaware law
with its principal place of business in New York. Neither E*Trade nor its members are citizens
of Missouri or Arizona.
34. Vanguard is a corporation organized under Pennsylvania law with its principal
place of business in Pennsylvania. Vanguard is not a citizen of Missouri or Arizona.
IV. Facts
35. Scottrade is informed and believes, based on postings on a website operated by
GeoBio (www.geobioenergy.com), that GeoBio bills itself as ―development stage company‖ that
―operates as a biodiesel supply and distribution company in the United States.‖
36. Otto and Sims are controlling persons of GeoBio for purposes of the Securities
Exchange Act of 1934.
- 10 -
37. Otto was an officer (Secretary) and director of GeoBio from September 29, 2007
until July 15, 2009 (i.e., until shortly after the SEC filed the above-referenced complaint).
38. In recently announced transactions, Otto’s law firm’s accounts receivable from
GeoBio for legal services having a reported value of $534,000 were exchanged for promissory
notes convertible into common shares of GeoBio. Those notes were reportedly converted into
billions of GeoBio common shares representing nearly 75% of GeoBio’s issued and outstanding
common stock. Otto’s apparent method of acquiring a majority of GeoBio’s common shares is
strikingly similar to the methodology the SEC asserts he employed to acquire a majority interest
in MitoPharm in furtherance of a fraudulent scheme to ―pump and dump‖ MitoPharm common
stock. See Exhibit 1, ¶¶ 20-26. Even after those exchange/conversion transactions, Otto’s law
firm appears to be one of GeoBio’s largest creditors (if not its largest), having billed GeoBio
over $1.7 million for legal services, $366,000 of which reportedly remained unpaid as of June
30, 2010.
39. Based on Otto’s and GeoBio’s filings with the SEC (made at different times), it
appears that Otto now owns substantial, and effectively controlling, blocks of GeoBio common
shares and potentially Series A Preferred shares.
40. Although Otto nominally resigned from all positions involving the management
of GeoBio effective July 15, 2009, Otto’s law firm continues to provide legal services to GeoBio.
In pleadings filed by Otto’s law firm on behalf of GeoBio as recently as October 2010 (in
litigation between GeoBio and a firm called TanOak, LLC, with which GeoBio once contracted
for executive services) Otto is described as GeoBio’s legal counsel and the person whose
approval was required before GeoBio could enter into material contracts. GeoBio’s most recent
- 11 -
(January 3, 2011) filing with the SEC identifies Otto as the person to contact concerning the
filing.
41. According to GeoBio’s most recent Schedule 14-C (filed October 20, 2010), Otto
holds 6,250,000 Series A Preferred GeoBio shares, which shares control 15.99% of the total
available capital stock votes in GeoBio. That Schedule reports that Otto owns 0 shares of
GeoBio common stock.
42. GeoBio’s Form 10-Q for the period ended June 30, 2010, however, reports that
GeoBio issued a total of 12,500,000 shares of Series A Preferred shares to Otto, 2,500,000 in
June, 2009 and 10,000,000 on January 25, 2010, in each instance in exchange for accounts
payable by GeoBio to Otto’s law firm. Each of these shares is reportedly convertible into a
single share of GeoBio common stock, at the option of the stockholder.
43. Otto’s most recently filed Annual Statement of Changes in Beneficial Ownership
on Form 5 (filed July 1, 2008) indicates that he beneficially owned 34,814,554 GeoBio common
shares at the time of its filing. The only subsequent statement of a change in beneficial
ownership filed by Otto was a Form 4 (filed October 23, 2008) disclosing a disposition of
1,920,960 GeoBio common shares. Otto has not filed any report with the Commission reporting
the sale or other disposition of his remaining 32,893,574 common shares, nor has he filed any
report disclosing the acquisition of the 12,500,000 Series A Preferred shares described in
GeoBio’s Form 10-Q. Otto’s beneficial ownership of GeoBio’s Series A Preferred Shares as
reported in GeoBio’s Schedule 14-C implies a disposition of 6,250,000 Series A Preferred
Shares for which Otto has not filed any report with the SEC.
44. Footnote 3 to the financial statements incorporated in the Form 10-Q GeoBio
filed with the SEC in August 2010, indicates that GeoBio’s obligations arising from Otto’s law
- 12 -
firm’s services to GeoBio during various periods were converted into an aggregate of 8.9 billion
GeoBio common shares in 2010. Those 8.9 billion shares represent nearly 75% of the GeoBio
common shares reportedly issued and outstanding on October 20, 2010, when GeoBio filed its
most recent Definitive Schedule 14-C with the SEC.
45. No registration statement registering the sale or distribution of those 8.9 billion
GeoBio common shares has been filed with the SEC pursuant to the Securities Act of 1933.
None of those shares have been registered for trading pursuant to the Securities Exchange Act of
1934.
46. No one has filed with the SEC a Form 3, Form 4 or Form 5 reporting their
ownership or acquisition (or disposition) of the 8.9 billion shares reportedly issued in exchange
for GeoBio’s obligations arising out of the Otto Law Firm’s services to GeoBio. Again, Otto’s
apparent conduct with respect to GeoBio bears a remarkable similarity to the modus operandi
the SEC alleges he employed to fraudulently ―pump and dump‖ MitoPharm stock. See Ex. 1, ¶
58 (―Otto did not report his ownership stake on Form 3 or his sales on Form 4 as required by
Section 16 of the Exchange Act. Failing to make these required filings was yet another way that
Otto hid his ownership and control of MitoPharm’s float from the public view.‖).
47. No one has filed with the SEC a Schedule 13-D reporting their acquisition of
more than 5% of GeoBio’s issued and outstanding common shares through the conversion of
promissory notes into the 8.9 billion GeoBio shares, even though those 8.9 billion GeoBio
common shares represent approximately 75% of the GeoBio common shares reportedly issued
and outstanding following the conversion.
48. Scottrade is informed and believes that Sims owns or controls an entity known as
Thalass Bay Corp. (―Thalass‖).
- 13 -
49. Thalass reportedly owns 6,250,000 shares of GeoBio Series A Preferred Stock,
and through such shares, controlled 15.99% of the total available capital stock votes of GeoBio
as of October 20, 2010.
50. Sims has been implicated in a variety of schemes involving fraud and market
manipulation related to publicly traded companies. See, e.g., Hyperdynamics Corporation v.
Southridge Capital Management, LLC, No. A10A0362, 699 S.E.2d 456 (Ga. Ct. App. July 16,
2010).
51. Neither Sims nor Thalass have filed with the SEC any reports on Forms 3, 4 or 5
reflecting the acquisition of any GeoBio common shares Sims or Thalass may hold or a or
Schedule 13-D reflecting the acquisition and holding of the 6,250,000 GeoBio Series A Preferred
Shares GeoBio reports were owned by Thalass on October 20, 2010, some (unspecified) portion
of which were to be converted into GeoBio common shares sometime prior to December 31,
2010.
52. GeoBio’s most recent Forms 10-Q and 10-K filed with the SEC make clear that
GeoBio currently has no meaningful business operations. It has reported no sales at any time
during the last three years, reported only $12,000 in sales since inception on November 1, 2004,
and has reportedly accumulated losses in excess of $20 million. Its reported shareholders’ equity
(as of June 30, 2010) was negative $2.18 million. Its reported assets of $129,000 (as of June 30,
2010) consist principally of unspecified ―Prepaid Expenses‖ and are dwarfed by its reported
current liabilities of $2,008,000.
53. At various times during 2010, GeoBio announced planned acquisitions of: (i)
Collins Construction, Inc., which GeoBio described as a civil construction company for which
GeoBio was to pay $8 million in cash and an additional $2.5 million in promissory notes; (ii)
- 14 -
H&M Precision Products, Inc., which GeoBio described as a seller of proprietary chemical
blends used in natural gas and oil wells for which GeoBio was to pay up to $8.4 million, and (iii)
Magna Energy Services, which GeoBio described as a chemical treatment and services company
for which GeoBio proposed to pay $3.2 million.
54. Each of these transactions would be a material transaction for GeoBio. GeoBio
has not filed with the SEC any documentation in support of any of the purported transactions.
55. In a footnote to the financial statements published in GeoBio’s Form 10-Q for the
quarter ended June 30, 2010, GeoBio disclosed that its ―current cash levels are not sufficient to
enable [it] to execute [its] business strategy,‖ including several announced acquisitions of other
companies on terms ―which require significant cash payments‖ and that there is ―substantial
doubt about [its] ability to continue as a going concern.‖
56. In GeoBio’s Definitive Schedule 14-C, filed October 20, 2010, the Company
disclosed that ―it has neither (i) received sufficient financing to complete either acquisition [of
Magna Energy Services and Collins Construction] at the time of this filing, nor (ii) has it
received commitments for the potential financing of either potential acquisition.‖
57. Notwithstanding this stated concern, and the absence of any public announcement
of any transactions that might alleviate the concern, GeoBio has continued to issue a series of
press releases creating the false impression that GeoBio is a going concern and that its shares
have intrinsic value.
58. On September 30, 2010, GeoBio issued a press release announcing the signing of
a letter of intent to purchase a ―pipeline construction company‖ on unspecified terms and
conditions. The identity of the ―pipeline construction company‖ is not disclosed in the press
release.
- 15 -
59. On October 5, 2010 (i.e., 15 days before filing the Definitive Schedule 14-C
described in paragraph 55, above), GeoBio issued a press release announcing that its acquisition
of Magna Energy had ―closed‖. The press release did not disclose the terms of the acquisition,
other than to state ―Satisfaction of certain post-closing debt obligations will be required.‖
Notwithstanding that this acquisition (according to the press release) ―closed,‖ and that the
acquisition is ostensibly sufficiently material to warrant a press release, no documentation
supporting the reportedly ―closed‖ acquisition has been filed with the SEC.
60. On October 13, 2010, GeoBio issued a press release announcing ―its new oil and
natural gas management team.‖ That press release identifies ―Willow Creek Companies, Inc.‖ as
a pipeline construction company to be integrated into GeoBio’s operations. Willow Creek is
apparently the company referenced but not identified in the September 30, 2010 press release.
61. On December 1, 2010, GeoBio issued a press release announcing ―the extension
of the previously announced acquisition agreement of a civil construction company operating in
the Piceance Creek Basin of Colorado‖ – presumably, the aforesaid Willow Creek Companies.
The press release does not indicate the terms and conditions of the acquisition, nor the source (or
even the proposed source), if any, of GeoBio’s financing to complete the acquisition. It does,
however, state that ―The extension calls for closing 90 days after the civil construction company
completes one of three new, and expectedly more profitable, master service agreements with
major customers,‖ implying that the extension was made to enable the civil construction
company, not GeoBio, to satisfy conditions precedent to closing. In that same press release,
GeoBio announced that it completed ―a recapitalization of its common stock.‖
62. On December 7, 2010, GeoBio issued another press release, stating that ―it is
pleased with its current progress implementing its business plan.‖ The release continued: ―On
- 16 -
December 1, 2010, GeoBio completed its planned 5,500:1 reverse recapitalization of its common
stock. GeoBio believes this recapitalization is integral to its strategic growth and financing
plans, and confirms that its current issued and outstanding common stock following the
recapitalization is 2.4 million shares (2,486,314).‖
63. On December 14, 2010, GeoBio issued another press release, the stated purpose
of which was to discuss ―its acquisition and organic growth strategy.‖ The release states that
GeoBio’s strategy, ―developed in conjunction with our management, investment bankers and
financial advisors‖ (none of whom are identified) ―focuses on oil and natural gas service
companies in the shale play areas that exhibit gross revenue in the $10M to $50M range,
consistent profitability and growth.‖ The release further asserts that ―Multiple key strategic
acquisitions are planned throughout the next five years‖ and that GeoBio ―has multiple targets in
different phases of closing, due diligence and negotiations.‖ No specific ―targets‖ are identified,
not even those involved in transactions that are in the process of closing.
64. Notwithstanding this string of press releases touting its purported acquisition
strategy, GeoBio has not disclosed a single transaction pursuant to which it has secured any
financing for any of the acquisitions the Company claims in multiple it press releases to be in the
―closing, due diligence and negotiation‖ phases, or to be otherwise ―planned.‖
65. Prior to December 1, 2010, GeoBio reported (in an October 20, 2010 filing with
the SEC) that it had issued and outstanding 11,573,807,619 common shares.
66. At least some (unspecified portion) of GeoBio’s outstanding common shares trade
publicly in the over-the-counter securities market commonly known as the ―Pink Sheets.‖
67. In September 2010, GeoBio announced that it was effecting a ―reverse
recapitalization‖—i.e., a reverse stock split. GeoBio subsequently reported in a Definitive
- 17 -
Schedule 14-C (filed October 20, 2010) that one effect of the ―reverse recapitalization‖ would be
to reduce the total number of issued and outstanding common shares by a factor of 5,500 – i.e.,
from 11,573,807,619 shares to 2,104,329 shares.
68. According to a press release issued by GeoBio on December 7, 2010 (a copy of
which is annexed as Exhibit 2), the reverse recapitalization was completed on December 1, 2010,
and upon completion, GeoBio had 2,486,314 common shares issued and outstanding.
69. GeoBio’s December 7, 2010, press release describes the transaction as a ―5,500:1
reverse recapitalization.‖
70. GeoBio’s press release is misleading because it describes the transaction in terms
that are consistent with standard stock split, as opposed to a ―reverse‖ split. Generally, when
stock splits are described by use of a numeric ratio, the first number stated in the ratio represents
the number of ―new‖ shares to be exchanged for the quantity of ―old‖ shares, and the second
number stated represents the number of ―old‖ shares to be exchanged for ―new‖ shares. Thus,
when a company engages in a forward split in which shareholders will end up with two shares
for each currently held share, the split is usually described as a ―2:1‖ or a ―2 for 1‖ split. When a
company engages in a reverse split in which shares holders will receive one new share for each
five thousand five hundred old shares, the split would usually be described as a ―1:5,500‖ or a ―1
for 5,500‖ split.
71. Based on the similarities between the pattern of activity involving GeoBio and the
pattern of activity involved in at least one other Pink Sheets issuer with which Otto has been
reportedly associated, MitoPharm, Scottrade is informed and believes that GeoBio’s reverse split
was orchestrated by Otto and Sims in furtherance of an ongoing ―pump and-dump‖ scheme they
are actively perpetrating.
- 18 -
72. Prior to arranging for the reverse stock split, Otto and Sims (via a controlled
entity, Thalass) obtained from GeoBio Series A Preferred Shares of GeoBio that are convertible
into GeoBio common shares.
73. None of Otto, Sims or Thalass have made any filing with the SEC to report their
acquisitions of these Series A Preferred Shares.
74. According to GeoBio’s Definitive Schedule 14-C (filed October 20, 2010), there
are agreements in place between Otto and GeoBio and between Thalass (the entity through
which Sims holds his Series A Preferred Shares) and GeoBio to exchange these shares for
GeoBio common shares prior to the end of 2010. The terms and conditions of the agreements,
including such basic information as the quantities of Series A Preferred Shares to be exchanged,
have not been publicly disclosed.
75. No registration statement registering the sale of any such common shares pursuant
to the Securities Act of 1933 has been filed. No shares to be issued in exchange for the Series A
Preferred Shares have been registered for trading pursuant to the Securities Exchange Act of
1934.
76. No person identified as holding GeoBio Series A Preferred Shares has filed any
report pursuant to Section 16 of the Securities Exchange Act of 1934 reporting the acquisition of
GeoBio common shares in exchange for GeoBio Series A Preferred Shares.
77. GeoBio has offered no public explanation for the difference between the quantity
of GeoBio common shares that were expected to be issued and outstanding following the reverse
stock split as described in the Definitive Schedule 14-C filed October 20, 2010 and the quantity
of GeoBio common shares GeoBio’s December 7, 2010 press release states are now issued and
outstanding.
- 19 -
78. Based on Scottrade’s review of publicly available information concerning the
history of Otto’s and Sim’s dealings with other issuers whose shares are traded in the Pink
Sheets, it appears that these actions taken by GeoBio were orchestrated by Otto and Sims and in
furtherance of a ―pump and dump‖ manipulation scheme through which Otto and Sims first
acquired controlling interests in GeoBio, then engaged in a series of actions calculated to
fraudulently pump up the share price of GeoBio common stock, after which they would dump
their GeoBio holdings at artificially inflated prices.
79. While Otto and Sims seem to have refined their manipulative schemes over time,
and Scottrade is not privy to all details of the GeoBio market manipulation scheme they are
presently conducting, the basic tenets of the scheme are as follows:
(a) participants in the scheme acquire, either directly or through affiliated entities,
and in exchange for phantom services or otherwise, substantial but unreported positions
in the common shares of the issuer (in this case, GeoBio);
(b) certain participants, in this case Otto and Sims, acquire disclosed holdings of
preferred securities of the issuer, GeoBio, through which they effectively exercise control
of the issuer;
(c) exercising the voting control of the issuer (GeoBio) conferred pursuant to the
preferred securities, the participants cause the issuer to effect a reverse split of the issued
and outstanding common shares, dramatically reducing the quantity of common shares
issued and outstanding, and effectively increasing the proportion of the issuer’s equity
securities entitled to vote through their holdings of preferred securities;
- 20 -
(d) further exercising that control, the participants engage in transactions with the
issuer to convert their preferred holdings into common shares on terms favorable to the
participants; and
(e) the participants artificially ―pump‖ the market price of the common shares,
enabling them to ―dump‖ their own holdings of common shares at artificially inflated
prices.
80. Pursuant to Section 16 of the Securities Exchange Act of 1934, 15 U.S.C. § 78p,
and regulations promulgated pursuant thereto (17 C.F.R. §§ 240.16a-1 and 240.16b-6), officers,
directors and holders of more than 10% of the issued and outstanding shares of the equity
securities of an issuer whose securities are publicly traded are required to report their holdings of
the issuer’s equity securities and any transactions in such securities on Forms 3, 4 and 5.
81. Otto was formerly an officer and director of GeoBio and as such was required to
file such reports through July 15, 2009.
82. Exhibits 3 and 4 hereto are true and correct copies of all Forms 3,4 and 5
reportedly filed with the SEC since 2006 by Otto and Sims, with respect to their holdings in
GeoBio equity securities and transactions therein.
83. No GeoBio officer, director, or holder of more than 10% of any class of GeoBio
equity securities has filed a Form 3 or Form 4 disclosing transactions in GeoBio’s common stock
during 2010.
84. Pursuant to Section 13(d) of the Securities Exchange Act of 1934, 15 U.S.C. §
78m, and regulations promulgated pursuant thereto (17 C.F.R. § 240.13d-1) persons acquiring
more than 5% of the issued and outstanding shares of a class of a publicly traded issuer’s equity
securities are required to report their holdings and subsequent changes thereto on Schedule 13-D.
- 21 -
85. Based on schedules filed by GeoBio with the SEC, it appears that Otto and Sims
each control in excess of 5% of the issued and outstanding preferred shares issued by GeoBio
and in excess of 5% of the common shares following conversion.
86. Based on disclosures made in GeoBio’s Form 10-K filed in August 2010, it
appears that obligations purportedly arising from Otto’s law firm’s services to GeoBio were
converted into GeoBio common shares representing nearly 75% of the issued and outstanding
GeoBio common shares in 2010.
87. Neither Otto, Sims nor any other GeoBio shareholder has filed a Schedule 13-D
respecting their holdings of GeoBio equity securities in 2010.
88. Exhibits 5 and 6 hereto are true and correct copies of all Schedules 13-D
reportedly filed by Otto and Sims, respectively, respecting their holdings of GeoBio equity
securities since 2006.
89. Between August 20, 2010 (i.e., shortly before the announcement of GeoBio’s
reverse recapitalization) and November 30, 2010 (the day preceding the effective date of the
reverse recapitalization) the highest volume of trading in GeoBio common shares on any given
day was less than 110,000 (split adjusted) shares. No transaction was reported to have been
executed during that time frame at a price exceeding $0.0001 per share.
90. No transactions in GeoBio shares were reported on Wednesday, December 1,
2010 or Friday, December 3, 2010.
91. On Thursday, December 2, 2010, transactions involving 3,534 (post-split) GeoBio
shares were reported. The closing price of GeoBio shares on December 2, 2010 was $0.065 per
share. That price was the price of the last reported transaction in GeoBio common shares
- 22 -
preceding the transactions in which Scottrade’s obviously mistaken orders to sell GeoBio shares
were executed on December 6, 2010.
92. Immediately prior to the effective date of the recapitalization, Scottrade held
1,937,654,280 common shares of GeoBio for the accounts of Scottrade customers. The actual
effect of the reverse recapitalization was to reduce the number of GeoBio common shares held
by Scottrade for its customer’s accounts to approximately 352,300 shares, or roughly 1/7 of the
total number of common shares GeoBio reported to be issued and outstanding, post-split.
93. Unless the 8.9 million shares (pre-split) issued in exchange for the obligations
arising out to the Otto Law Firm’s legal services to GeoBio (or some portion thereof) are counted
as part of the publicly traded float of GeoBio shares, Scottrade’s customers held more than 50%
of the publicly traded GeoBio common shares.
94. At approximately 11:00 a.m. Central Standard Time on Monday, December 6,
2010, a Scottrade employee responsible for making the entries in Scottrade’s data processing
system necessary to reflect the changes in Scottrade’s customers’ holdings of GeoBio shares due
to the reverse recapitalization mistakenly entered data in a way that caused Scottrade’s records to
indicate that such holdings had increased by a factor of 5,500, rather than decreased by a factor
of 5,500.
95. Due to this mistake, at approximately 11:01 a.m. (CST) on December 6, 2010,
Scottrade’s records reflected that it held over ten trillion GeoBio shares (specifically,
10,657,098,540,000). As a result, Scottrade’s customers whose accounts held GeoBio common
shares who viewed their accounts on line at that time would have seen data indicating that their
account now held 5,500 times more GeoBio common shares than were reflected pre-reverse
- 23 -
split. The displayed quantity of shares was over thirty million times greater than the actual
quantity of GeoBio shares held for the customer’s accounts (post-split).
96. There were no reported trades in GeoBio common shares on December 6, 2010
until after 11:05 a.m. (CST).
97. Between 11:02 a.m. and 11:18 a.m. on December 6, a number of Scottrade
customers entered limit orders to sell some or all of their holdings of GeoBio shares. In the
aggregate, Scottrade received customer orders to sell over three billion GeoBio common shares
during this brief period.
98. Based on these orders, between 11:05 a.m. (CST) and 11:18 a.m. on December 6,
2010, Scottrade delivered to Knight offers to sell approximately 2.85 billion GeoBio common
shares in six lots, the smallest of which was for one million shares. Each lot was offered to
Knight on terms such that a person knowledgeable about GeoBio and the market for its shares
should have known that either or both the quantity or the price at which the offer was made was
wildly inconsistent with the market for GeoBio shares.
99. When Scottrade tendered and Knight received those offers, there were less than
2.5 million shares of GeoBio common stock issued and outstanding, and likely only about
600,000 GeoBio common shares that were available for public trading in compliance with
applicable securities laws.
100. Between 11:05 a.m. and 11:18 a.m. (CST) on December 6, 2010, Knight accepted
Scottrade’s offers to sell approximately 3.38 million GeoBio common shares.
101. Knight agreed to ―bust‖ (i.e., to rescind) one trade involving 726,110 GeoBio
common shares.
- 24 -
102. At present, the contracts apparently formed when Knight accepted Scottrade’s
mistaken offers on December 6, 2010 (and not otherwise resolved since then) oblige Scottrade to
deliver to Knight approximately 2.6 million GeoBio common shares at an average price of
$0.0068 per share.
103. Scottrade’s transactions with Knight and another GeoBio market maker (UBS)
resulted in sales of approximately 19 million GeoBio common shares, or roughly eight times the
quantity of GeoBio common shares reportedly issued and outstanding, being reported as
occurring during a time span of roughly 13 minutes on December 6, 2010.
104. When those transactions were reported to the market place, market participants
immediately drew the (accurate) conclusion that someone had mistakenly entered orders to sell
more GeoBio shares than they could possibly have owned, and, consequently, was ―short‖
GeoBio and had a need to purchase GeoBio common shares to ―cover‖ the obligations arising
from those mistaken orders.
105. Shortly after Scottrade’s mistaken orders and the resulting trades became obvious
to the market, internet message boards began actively promoting the concept of forcing Scottrade
to cover its short position in GeoBio common shares by purchasing those shares at prices that
bear no relationship to the value of GeoBio, its assets or its business operations.
106. Some market participants have attempted to capitalize upon the obviously
mistaken trades that occurred between 11:05 a.m. and 11:18 am (CST) on December 6, 2010.
Since 11:18 a.m. (CST), the market price for GeoBio shares has been extremely volatile, with
prices ranging from $0.0051 per share to $1.15 per share.
107. Other market participants, known only by the screen names under which they post
messages on internet sites, are actively encouraging GeoBio holders to refrain from selling their
- 25 -
common shares and thereby force Scottrade to bid up the price of such shares to even higher
levels. Copies of representative postings are compiled and annexed as Exhibit 7.
108. Scottrade does not know of the actual identities of the persons responsible for
such postings, and does not know of any direct communications or agreements between the
persons responsible for such postings and any of the Defendants. Such postings, however, like
the series of press releases issued by GeoBio, the sketchy disclosures by GeoBio and persons
who should be reporting their GeoBio holdings and transactions on Forms 3 and 4 and Schedule
13-D concerning what GeoBio shares are issued, outstanding and held by GeoBio insiders such
as Otto and Sims, and what agreements have been made to exchange Series A Preferred GeoBio
shares for GeoBio common shares, and the reverse stock split effected by GeoBio, appear to be
made by persons motivated to attempt to ―pump‖ the market price of GeoBio common shares to
artificial levels – i.e., to cause the market price of a security whose issuer has a negative net
worth, no current earnings or history of earnings, and whose ability to continue operating as a
going concern is substantially in doubt, to reach levels at which the market price bears no
apparent relationship to the issuer’s assets, earnings or prospects for same.
109. Since learning of its mistake and initiating corrective action, Scottrade has been
able to resolve some, but not all, of the delivery obligations seemingly arising from acceptances
of its obviously mistaken offers to sell the GeoBio common shares involved in the reported
transactions.
110. Knight has issued ―buy-in‖ notices to Scottrade respecting the unresolved
mistaken transactions. Knight’s most recent buy-in notices state that Scottrade is obliged to
deliver 2,466,427 GeoBio common shares to Knight, and, failing such delivery, that Knight
intends to ―buy-in‖ the shares.
- 26 -
111. Scottrade has purchased from UBS sufficient GeoBio shares to more than offset
the delivery obligations arising from Scottrade’s sell orders mistakenly communicated to UBS on
December 6, 2010. Indeed, at this point, Scottrade has purchased from UBS, but not received
delivery, of more than one million GeoBio common shares in excess of those needed to satisfy
the delivery obligations to UBS apparently arising from the mistaken sell orders UBS executed
for Scottrade on December 6, 2010. Because Scottrade has not received delivery of these shares
from UBS, Scottrade is unable to tender such shares to Knight in settlement of the still unsettled
trades that underlie Knight’s buy-in notices to Scottrade.
112. Knight apparently sold at least some of the GeoBio shares that were the subject of
Scottrade’s offers accepted by Knight to other broker-dealers, including the Relief Defendants.
113. Knight’s buy-in notices to Scottrade reflect that it has received buy-in notices
from each of NFS, Vanguard, E*Trade, Pershing, UBS and Penson.
COUNT I
A Claim for Rescission Against Knight
114. Scottrade incorporates by reference the allegations of paragraphs 1 – 113, above,
as though the same were fully set forth herein.
115. At the times Scottrade offered GeoBio shares for sale on behalf of its customers
on December 6, 2010, it was operating under a mistaken belief as to the following material facts:
a. That it held for its customers accounts common shares of GeoBio in quantities
that were more than sufficient to enable Scottrade to settle any trades resulting from
acceptance of its offers by delivering GeoBio shares already held by Scottrade for the
accounts of its customers;
- 27 -
b. That its offers to sell GeoBio shares on December 6, 2010, involved fewer shares
than the quantity of GeoBio shares issued and outstanding on December 6, 2010; and
c. That the price at which it offered to sell the shares was reasonable in light of the
prevailing market prices for such shares.
116. Scottrade is informed and believes that when Knight accepted Scottrade’s offers
to sell GeoBio common shares on December 6, 2010, Knight either:
a. Was likewise mistaken concerning: (1) the relationships between and among (i)
the numbers of GeoBio common shares offered for sale by Scottrade (2.85 billion), (ii)
the number of shares then held by Scottrade for the accounts of its customers, and (iii) the
number of GeoBio common shares then issued and outstanding (2.5 million), and (2) the
relationship between the prevailing market prices for GeoBio common shares and the
prices at which Scottrade was offering to sell such shares; or
b. Knew or should have known that Scottrade was operating under a mistaken belief
concerning: (1) the relationships between (i) the numbers of GeoBio common shares
offered for sale by Scottrade, (ii) the number of shares Scottrade could have conceivably
then held for the accounts of its customers, and (iii) the number of GeoBio common
shares then issued and outstanding, as well as (2) the relationships between the prevailing
market prices for GeoBio common shares and the prices at which Scottrade was offering
to sell such shares.
117. Missouri courts have long recognized that relief may be granted in a court of
equity in rescission cases where a unilateral mistake has been made. In such instances,
rescission is appropriate where the opposite party either knew of the mistake by the other party
or the mistake was of such a nature that it must have been known to the other party.
- 28 -
118. Scottrade’s mistakes as to the quantity of shares it was offering to sell and the
price at which it was offering to sell those shares were so out of proportion to the quantities of
GeoBio common stock actually issued and outstanding and the price at which such shares had
recently traded that Knight must either have been, like Scottrade, actually mistaken concerning
such matters or knowledgeable of Scottrade’s mistake and intending to take unfair and
unreasonable advantage of that mistake, such that equity will intervene and prevent enforcement
of the contract seemingly reached by the offers and acceptances exchanged between the parties.
119. Alternatively, because of the obvious disparities between (a) the quantities of
GeoBio common shares Scottrade offered to sell to Knight and the quantity of GeoBio common
shares issued and outstanding, and (b) the price at which GeoBio shares had last traded and the
price at which Scottrade was offering to sell GeoBio shares to Knight, there was no actual
meeting of the minds between Scottrade and Knight on the terms of sale. Consequently, no
contract of sale was actually formed.
120. Alternatively, if any contracts were formed, enforcement of such contracts would
unjustly enrich Knight or others acting through Knight in the market.
121. In all events it would be inequitable (and disruptive of the market for GeoBio
common shares) to enforce any presently executory contract apparently formed between
Scottrade and Knight on December 6, 2010, when Knight accepted Scottrade’s mistaken offers
to sell GeoBio shares.
COUNT II
A Claim for Relief From Violations of Section 10(b)

of the Securities Exchange Act of 1934 And Rule 10b-5
122. Scottrade incorporates by reference the allegations of paragraphs 1 – 113, above,
as though the same were fully set forth herein.
- 29 -
123. The:
a. issuance of the press releases described above;
b. failures of Otto and Sims to file the requisite reports on SEC Forms 3 and 4 and
Schedules 13-D to reflect (a) Otto’s and Sims’ holdings, control, or beneficial
ownership of GeoBio shares or (b) changes in such holdings, control or beneficial
ownership of GeoBio shares;
c. failure of GeoBio to report Otto’s holdings of GeoBio common shares on the
Schedule 14-C filed October 20, 2010;
d. failure of GeoBio to identify those ―certain other parties‖ who exchanged the Otto
Law Firm’s accounts receivable from GeoBio for promissory notes convertible, in
the aggregate, into over 8.9 billion GeoBio common shares, or nearly 75% of the
GeoBio shares which would be issued and outstanding upon such conversion;
e. failures of GeoBio to insist that the recipients of those 8.9 billion GeoBio
common shares comply with the reporting requirements imposed by Sections 13-
D and Section 16 of the Securities Exchange Act of 1934, or to identify them in
the Schedule 14-C filed October 20, 2010;
f. failure to describe, in the Schedule 14-C filed October 20, 2010 or other filing
with the SEC, the material terms of the reported agreements between GeoBio and
the holders of GeoBio Series A Preferred Shares to exchange the Series A
Preferred Shares for GeoBio common shares or to file those agreements with the
SEC;
g. failures to file with the SEC material contracts described in press releases
announcing purported impending acquisitions;
- 30 -
h. engineering and approval of the ―reverse recapitalization‖ – i.e., the reverse stock
split – in GeoBio common shares; and
i. the subsequent publication of internet postings concerning actions to be taken to
maintain or increase the market price of GeoBio common shares;
singularly and collectively, are calculated to ―pump‖ the market price of GeoBio common shares
to artificial levels.
124. The actions described in paragraphs 1 – 113 and 123 have, in fact, caused the
market price of GeoBio common shares to become artificial – i.e., divorced from any connection
to the issuer’s assets, liabilities, earnings or reasonable prospects for earnings.
125. These circumstances have created the opportunity for Otto and Sims to ―dump‖
their GeoBio common shares at artificially high prices.
126. The actions taken by Defendants GeoBio, Otto and Sims were undertaken not for
any legitimate corporate purposes but with the sole design of creating a distorted market for the
shares of GeoBio common stock and to enable Defendants Otto and Sims to ―dump‖ their
GeoBio shares at artificially high market prices resulting from their actions.
127. Because there is no legitimate explanation for the acts and omissions described
above, Scottrade is informed and believes that GeoBio, Otto and Sims each knew and intended
that these actions would distort the market for the shares of GeoBio stock and artificially inflate
its share price, enabling Defendants Otto and Sims to ―dump‖ their GeoBio shares at artificially
high prices resulting from their activities.
128. Otto’s and Sims’ knowledge and intentions can be inferred from their
involvement in similar manipulative activities involving the securities of other issuers whose
securities were traded in the ―Pink Sheets,‖ including, e.g., MitoPharm Corporation.
- 31 -
129. Defendants GeoBio, Otto and Sims thereby engaged in a manipulative scheme,
and are continuing to engage in a manipulative scheme, in violation of SEC Rule 10b-5 and
Section 10b of the Securities Exchange Act.
130. Scottrade has already incurred damages exceeding $500,000 as a consequence of
Defendants’ manipulative scheme, in that it has been forced to pay exorbitant and artificially
high prices to acquire GeoBio common shares having little or no intrinsic value in order to cover
delivery obligations arising from the mistaken trades in GeoBio common shares described above.
131. Because Defendants GeoBio, Otto and Sims’ manipulative scheme is ongoing,
and (at least until this Court orders rescission of the as yet unsettled trades based on Scottrade’s
mistaken orders to sell GeoBio shares) Scottrade is subject to market risk associated with the
delivery obligations arising out of the December 6, 2010 trades described above, Scottrade is
exposed to continuing risks of damages resulting from that manipulative scheme.
COUNT III
A Claim For Injunctive Relief
132. Scottrade incorporates by reference the allegations of paragraphs 1 – 131 as
though the same were fully set forth herein.
133. Presumably, in accordance with applicable market rules, Relief Defendants
Penson, NFS, E*Trade, Vanguard, UBS, Pershing have each issued ―buy-in‖ notices to Knight,
advising Knight that, absent delivery of GeoBio common shares in settlement of trades made on
December 6, 2010 in which Knight was the seller and the respective Relief Defendants were the
buyers of GeoBio common shares, the Relief Defendants will purchase, in the open market and
at Knight’s expense, sufficient shares to cover the GeoBio shares Knight purported to sell but
failed to deliver.
- 32 -
134. Knight, consistent with applicable market rules, has conveyed these buy-in
notices to Scottrade, and notified Scottrade that, absent delivery by Scottrade of approximately
2.5 million GeoBio common shares, Knight will purchase, in the open market and at Scottrade’s
expense, sufficient shares to cover the GeoBio shares Knight purported to purchase from
Scottrade on December 6, 2010 pursuant to Scottrade’s mistaken orders to sell billions of
GeoBio shares.
135. Because approximately 75% of the GeoBio common shares reportedly issued and
outstanding (a) were not sold in an offering registered pursuant to the Securities Act of 1933 and
(b) have not been registered for trading pursuant to the Securities and Exchange Act of 1934, the
publicly tradable float in GeoBio common shares should be approximately 600,000 shares, or
less than 25% of the quantity of GeoBio shares involved in pending, unsettled transactions
involving Scottrade.
136. Based on transactions between Scottrade and UBS in which UBS contracted to
sell and Scottrade contracted to by GeoBio common shares (subsequent to the transactions
executed on December 6, 2010 based on Scottrade’s mistaken orders), Scottrade is entitled to
receive from UBS delivery of in excess of 1 million GeoBio common shares. The ordinary
settlement dates for UBS to deliver such shares to Scottrade have passed without delivery having
been made.
137. Since December 6, 2010, transactions involving the purchase and sale of an
additional seven million plus GeoBio common shares have been reported.
138. Scottrade is informed and believes that delivery of many of the shares involved in
such reported transactions should have been, but have not been, completed at this time.
- 33 -
139. In the event that Knight or any of the Relief Defendants attempt to purchase
shares pursuant to their buy-in notices, (a) the effects of the manipulative scheme described
above will be further exacerbated, and (b) there will be further confusion in the market for
GeoBio shares because there are insufficient shares available for public trading in compliance
with applicable securities laws to satisfy existing delivery obligations, and the ―buy-in‖
transactions will increase the quantity of open, unsettled transactions in the shares of GeoBio
common stock.
140. Until such time as the trades effected pursuant to Scottrade’s obviously mistaken
orders to sell GeoBio common shares are rescinded, restoration of an orderly, un manipulated
market for GeoBio common shares is practically impossible.
141. If the Relief Defendants proceed to execute ―buy-ins‖ at what is ultimately
intended to be Scottrade’s expense, Scottrade will be irreparably harmed, in that (a) its action for
rescission of the trades made pursuant to Scottrade’s obviously mistaken orders to sell GeoBio
common shares may be frustrated, and (b) Scottrade will be left without any adequate remedy.
WHEREFORE, Scottrade prays that this Court:
A. Enter judgment in favor of Scottrade and against Knight on Count I of Scottrade’s
First Amended Complaint either (1) declaring that no contract was made between Scottrade and
Knight when Knight purported to accept Scottrade’s offers to sell Knight 2,599,427 shares of
GeoBio common stock made December 6, 2010, or (2) rescinding any contract(s) that did result
from such acceptance, and for such other and further relief as is appropriate under the
circumstances;
B. Enter judgment in favor of Scottrade and against Defendants GeoBio, Otto and Sims
on Count II of Scottrade’s First Amended Complaint awarding Scottrade damages in an amount
- 34 -
to be proven at trial but in no event less than $500,000, together with prejudgment interest, the
costs of this action, and such other and further relief as may be appropriate under the
circumstances; and
C. Enter an injunction in favor of Scottrade and against Knight and each of the Relief
Defendants, enjoining those parties from purchasing any shares of GeoBio common stock
pursuant to the buy-in notices heretofore issued by any of them.
Respectfully submitted,
THOMPSON COBURN LLP
By: /s/ Thomas E. Douglass

Thomas E. Douglass, #23019MO
Kenton E. Knickmeyer, #29158MO
One US Bank Plaza
St. Louis, Missouri 63101
314-552-6064
FAX 314-552-7064
Kknickmeyer@Thompsoncoburn.com
Attorneys for Plaintiff Scottrade, Inc.
- 35 -
CERTIFICATE OF SERVICE
I hereby certify that on January 4, 2011, the foregoing was filed electronically with the
Clerk of Court to be served by operation of the Court’s electronic filing system, certified mail
and facsimile.
THOMPSON COBURN LLP
By: /s/ Thomas E. Douglass

Thomas E. Douglass, #23019MO
Kenton E. Knickmeyer, #29158MO
One US Bank Plaza
St. Louis, Missouri 63101
314-552-6064
FAX 314-552-7064
Kknickmeyer@Thompsoncoburn.com
Attorneys for Plaintiff Scottrade, Inc.
- 36 -

ST-GBOE Complaint AMENDED

Hochgeladen von

Dokumentinformationen

Originaltitel

Copyright

Verfügbare Formate

Dieses Dokument teilen

Dokument teilen oder einbetten

Freigabeoptionen

Stufen Sie dieses Dokument als nützlich ein?

Sind diese Inhalte unangemessen?

Copyright:

Verfügbare Formate

ST-GBOE Complaint AMENDED

Hochgeladen von

Copyright:

Verfügbare Formate

Case 4:10-cv-02380-HEA Document 5 Filed 01/04/11 Page 1 of 36

UNITED STATES DISTRICT COURT

Serve on: Pershing LLC )

FIRST AMENDED COMPLAINT

2. On December 6, 2010, as a result of a clerical error in recording the effects of an

shares on behalf of certain Scottrade customers.

of a mistake on Scottrade’s part.

4. Within 15 minutes of communicating the mistaken GeoBio sell orders to Knight

over 16 million GeoBio shares.

informed Scottrade had already been sold.

8. GeoBio’s shares have no intrinsic value. Specifically, GeoBio has disclosed in

liabilities exceeding $2 million. Additionally, GeoBio’s most recently published financial

times greater than its total assets.

9. Nevertheless, GeoBio’s control persons continue to cause the Company to publish

thereby ―pumping‖ the market price of GeoBio shares.

settled by delivery of shares in the ordinary course.

of Scottrade and other market participants.

correcting mistaken orders at prices attributable to the Primary Defendants’ manipulative

II. Jurisdiction and Venue

violation occurred in this District.

exclusive of interest and costs, and is between citizens of different states.

(―Penson‖) because Penson is registered in Missouri as a broker-dealer of securities, and this

action arises out of Penson’s business as a securities broker-dealer.

business as a securities broker-dealer.

arises out of NFS’s business as a securities broker-dealer.

Pershing’s business as a securities broker-dealer.

out of E*Trade’s business as a securities broker-dealer.

(―Vanguard‖) because Vanguard is registered in Missouri as a broker-dealer of securities, and

this action arises out of Vanguard’s business as a securities broker-dealer.

III. The Parties

23. Scottrade is an online broker-dealer of securities. It is a corporation organized

business in St. Louis, Missouri.

the report in a timely manner.

Litigation Release No. 21126/July 13, 2009 available at

http://www.sec.gov/litigation/litreleases/2009/lr21126.htm. According to the SEC, Otto

of MitoPharm Corporation, ostensibly a developer of anti-aging products. Otto and his

future penny stock offerings. The SEC’s Complaint is annexed as Exhibit 1.

27. David Sims is an individual. Scottrade is informed (from various published

manipulation related to publicly traded companies. See, e.g., Hyperdynamics Corporation v.

28. Knight is a securities broker-dealer. It is a limited partnership organized under

29. Penson is a securities broker-dealer. It is North Carolina corporation with its

principal place of business in Texas. It is not a citizen of Missouri or Arizona.

30. UBS Securities is a securities broker-dealer. It is a limited liability corporation

in Connecticut. UBS AG is a Swiss corporation with its principal place of business in

31. NFS is a securities broker-dealer. It is a limited liability corporation organized

32. Pershing is a securities broker-dealer. It is a limited liability corporation

members are citizens of Missouri or Arizona.

33. E*Trade is a securities broker-dealer. It is a limited liability corporation

place of business in Pennsylvania. Vanguard is not a citizen of Missouri or Arizona.

35. Scottrade is informed and believes, based on postings on a website operated by

―operates as a biodiesel supply and distribution company in the United States.‖

Exchange Act of 1934.

in MitoPharm in furtherance of a fraudulent scheme to ―pump and dump‖ MitoPharm common

shares and potentially Series A Preferred shares.

GeoBio common stock.

single share of GeoBio common stock, at the option of the stockholder.

reported in GeoBio’s Schedule 14-C implies a disposition of 6,250,000 Series A Preferred

most recent Definitive Schedule 14-C with the SEC.

and outstanding following the conversion.

Thalass Bay Corp. (―Thalass‖).

as of October 20, 2010.

manipulation related to publicly traded companies. See, e.g., Hyperdynamics Corporation v.

current liabilities of $2,008,000.