SEC accuses Vegas diamond company of fraud

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SEC accuses Vegas diamond company of fraud

By Michelle Graff

April 08, 2008

Las Vegas—The Securities and Exchange Commission (SEC) has filed suit against an allegedly fraudulent Las Vegas diamond company that collected some $64.2 million in profit as part of a stock-selling scheme that scammed investors, court papers say.

The charges, filed on Monday in U.S. District Court in Las Vegas, allege that between January 2003 and May 2005, CMKM Diamonds Inc., "purportedly" a diamond and gold mining company, fraudulently issued hundreds of billions of shares of stock to scheme "mastermind" John Edwards, company CEO Urban Casavant and their associates, according to court documents.

A combination of false information about the company—disseminated through press releases, Internet chat boards and "funny car" race events held nationwide—and substantial trading volume facilitated by sales in an unregistered distribution induced about 40,000 investors to buy CMKM stock, netting millions for those involved.

However, the company did not do any actual diamond or gold mining, court records say.

"In reality, Casavant ran the company from his house in Las Vegas and CMKM had no meaningful operations other than issuing and promoting its own stock," court documents state.

Court papers say that Edwards, Casavant and their associates sold their shares in the public market for at least $64.2 million, "much of which was paid to Casavant to support his extravagant lifestyle."

Casavant, a 51-year-old Canadian citizen, made about $31.5 million; Edwards, a 65-year-old British citizen, made about $26.4 million; and Casavant's nominees to the company's board of directors made about $6.3 million, according to court documents.

Information on CMKM Diamonds' Web site, Cmkmdiamondsinc.com, shows that the company, now headed by CEO Kevin West, will file an amended complaint in a lawsuit against Casavant.

In response to that, and to questions regarding ongoing court proceedings, the company's reply is: "The company has no response to questions that, if answered fully, might disclose trial strategies, tactics or other matters to the opposing parties."

In addition, when asked how long CMKM expects it will take to rebuild, the company's reply is: "The company currently has no ongoing business, no revenues and is devoting all available time and resources to litigation. There are three lawsuits against the company, a Wells Notice from the SEC and two lawsuits filed by the company in efforts to recover assets. There are so many variables with time due to matters being tied up in litigation that it is impossible to put a timeframe on anything."

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