Cemtrex Reveals SEC Investigation Connected to Ex-Director Accused in Pump-and-Dump Scheme
Micro-cap industrial electronics manufacturer reveals it has received subpoenas seeking information about a company claiming it’s developing a mobile application to detect COVID-19.
January 5, 2021
The former Officer and Director, Aron Govil, is currently CEO of Ducon Technologies Inc. which announced plans to be acquired by a small company called Telidyne Inc. (TLDN). In its 2020 10-K, Cemtrex (CETX) reveals the SEC’s focus is, in part, related Telidyne:

“The Company has received subpoenas from the Securities and Exchange Commission (“SEC”). The subpoenas request documents and information concerning, among other things, a company known as Telidyne Inc...”

Telidyne, according to Cemtrex, is also controlled by Aron Grovil, a former CETX officer and Director. Cemtrex reveals that the SEC is seeking the following information:

“...securities offerings related to Telidyne, and the Company’s own product and services, business operations, securities’ offerings and use of proceeds.”

Telidyne labels itself as an emerging technology company that claims to be developing a mobile application capable of detecting COVID-19 and other infectious diseases. In May of 2020, Govil issued a news release announcing the Ducon acquisition would not be completed.

In a 2017 federal securities class action suit— which alleges Ducon and Cemtrex operate out of the same address— plaintiffs accused Cemtrex officers, including Govil, of undisclosed selling and orchestrating a pump-and-dump scheme:

“Specifically, Defendants made false and/or misleading statements and/or failed to 8 disclose that: (1) over $1 million has been paid to notorious stock promoters since late 2015; (2) the entity paying for the stock promotion was owned by Defendant Aron Govil and based out of Cemtrex’s corporate headquarters; (3) senior executives engaged in undisclosed insider selling; (4) the Company retained a foreign accounting firm with a history of fraudulent endeavors to conduct its financial audits; and (5) as a result of the foregoing, Defendants’ statements about Cemtrex’s business, operations, and prospects were false and misleading and/or lacked a reasonable basis.”

In its 2019 10-K, CETX disclosed it had settled a consolidated class action complaint:

“Three securities class action complaints were filed against our company and certain of our executive officers in the U.S. District Court for the Eastern District of New York on February 24, 2017. Under the requirements of the Private Securities Litigation Reform Act of 1995, these three alleged class actions, as well as all further related actions, were consolidated into a single lawsuit on March 9, 2018. On October 4, 2018, the Company reached a settlement on the securities class action litigation through a mediator for an amount of $625,000 and also reached a settlement on Derivative action for an amount of $100,000. This settlement was approved by the court and the settlement amounts were paid by the Company’s insurance carrier.”

The company reported fourth quarter and full year results the same day it filed its new 10-K. In an earnings news release, the company did not mention the SEC investigation. CETX stock rose nearly 9%.

In the 2020 10-K, CTEX offers additional detail:

“Although the Company is not currently the subject of any enforcement proceedings, the investigation could lead to enforcement proceedings if the SEC contends that the Company has not complied with securities laws. The Company is fully cooperating with the SEC's requests. The Company has incurred legal expenses and may incur significant legal and accounting expenditures in connection with the SEC’s investigation. The Company is unable to predict how long the SEC’s investigation will continue or its outcome.”
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