SEC v. Keith Houlihan, No. 9:18-cv-80585, Southern District of Florida (May 9, 2018) — Complaint

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA

CASE NO.: ________________________

SECURITIES AND EXCHANGE COMMISSION, )
        )
   Plaintiff,    )
v.        )
        )
KEITH            HOULIHAN,                                                            )
        )
   Defendant.    )
_______________________________________________  )

COMPLAINT FOR INJUNCTIVE AND OTHER RELIEF

 Plaintiff Securities and Exchange Commission (“Commission”) alleges as follows:

INTRODUCTION

1. The  Commission  brings  this  action  against  Keith  Houlihan  (“Defendant”)  for
violating the antifraud and registration provisions of the federal securities laws.
2. From  April  2009,  through  August  2015,  while  he  was  president  of  Sanomedics
International Holdings, Inc. (“Sanomedics”), Defendant participated in a fraudulent scheme that
raised  approximately  $21  million  from  approximately  700  investors,  by:  (1)  directly  soliciting
prospective  investors  to  purchase  Sanomedics  shares  based  on  false  statements;  (2)  hiring  a
boiler room to pitch Sanomedics’ stock to prospective investors using false statements regarding
the price and limited number of Sanomedics shares being sold; (3) supporting the boiler room by
paying sales agents undisclosed commissions; and (4) signing Sanomedics’ periodic filings with
the  Commission  that  contained  materially  false  and  misleading  statements  and  omissions
regarding Sanomedics’ use of an illegal boiler room to finance its operations.
3. From  May  2009  to  May  2010,  Defendant  solicited,  offered  and  sold  shares  of
Sanomedics  stock  to  prospective  investors  falsely  stressing  that  for  a  limited  time  only,  a

2
“limited  number”  of  Sanomedics  shares  were  available  to  investors  for  purchase  at  a  steep
discount to the current price of Sanomedics’ shares then quoted on the Over-the-Counter Bulletin
Board   (“OTCBB”),   an   electronic   trading   service   that   offers   investors   price   and   volume
information for equity securities.
4. Defendant used money received from Sanomedics’ investors to hire a boiler room
operator to solicit prospective investors to purchase Sanomedics stock.
5. Defendant    used    money    received    from    Sanomedics’    investors    for    sales
commissions,  fees,  and  other  monetary  distributions  to  support  a  boiler  room  operation  whose
sales agents offered and sold Sanomedics stock.
6. Defendant,   as   Sanomedics’   president,   signed   Sanomedics’   stock   certificates
representing ownership interests for investors who bought shares from the boiler room operation.
7. Defendant  signed  Sanomedics’  false  filings  with  the  Commission  that  failed  to
disclose that Sanomedics was fraudulently raising money through a boiler room operation.
8. Through   his   fraudulent   conduct,   the   Defendant   received   over   $100,000 of
investors’ proceeds for his own personal benefit and use.
9. Through  this  misconduct,  Houlihan:  (a)  violated  Section  17(a)  of  the  Securities
Act  of  1933  (“Securities  Act”)  and  Section  10(b)  of  the  Securities  Exchange  Act  of  1934
(“Exchange  Act”)  and  Rule  10b-5  thereunder;  (b)  aided  and  abetted  the  boiler  room  operator’s
violations of Section 15(a) of the Exchange Act; (c) aided and abetted Sanomedics’ violations of
Section  13(a)  of  the  Exchange  Act,  and  Rules  12b-20,  13a-1  and  13a-13  thereunder;  and  (d)
violated Rule 13a-14 of the Exchange Act.  Unless enjoined, the Defendant is reasonably likely
to engage in future violations of the federal securities laws.

3
THE DEFENDANT
10. Houlihan, age 50, was a resident of Boca Raton, Florida and the co-founder and
president  of  Sanomedics.    Houlihan  is  not,  and  was  not  at  the  time  of  the  conduct  described
herein, registered with the Commission as a broker or dealer.
BACKGROUND OF SANOMEDICS
11. Sanomedics,  f/k/a  “Sanomedics  International  Holdings,  Inc.,”  is  a  company
incorporated  in  Delaware  with  its  principal  place  of  business  in  Miami,  Florida.    It  was
purportedly  in  the  business  of  developing  and  selling  non-contact  infrared  thermometers.
Sanomedics  became  a  publicly-traded  company  in  July  2009  through  a  reverse  merger  with  a
public shell company.  It was an SEC-reporting company and was quoted on OTC Link, which is
operated  by  OTC  Markets  Group  Inc.,  under  the  symbol  “SIMH,”  from  October  27,  2010  until
May 2, 2017, when the Commission filed a settled administrative proceeding against Sanomedics
pursuant to Section 12(j) of the Exchange Act revoking its registration.
12. Sanomedics’  stock  is  a  “penny  stock”  as  defined  by  the  Exchange  Act.  At  all
times  relevant  to  this  action,  the  stock’s  shares  traded  at  less  than  one  dollar  per  share.  During
the  same  time  period,  Sanomedics’  stock  did  not  meet  any  of  the  exceptions  to  penny  stock
classification pursuant to Exchange Act Section 3(a)(51), 15 U.S.C. § 78c(a)(51), and Rule 3a51-
1,  17  C.F.R.  §  240.3a51-1.  For  example  Sanomedics’  stock:  (a)  did  not  trade  on  a  national
securities exchange; (b) was not an “NMS stock,” as defined in 17 C.F.R. § 242.600(b)(47); (c)
did  not  have  tangible  assets  (i.e.,  total  assets  less  intangible  assets  and  liabilities)  in  excess  of
$5,000,000; and (d) did not have average revenue of approximately $6,000,000 for the last three
years.

4
JURISDICTION AND VENUE

13. This Court has jurisdiction over this action pursuant to Sections 20(b), 20(d) and
22(a)  of  the  Securities  Act,  15  U.S.C.  §§  77t(b),  77t(d)  and  77v(a);  and  Sections  21(d),  21(e),
and 27(a) of the Exchange Act, 15 U.S.C. §§ 78u(d), 78u(e) and 78aa(a).
14. This Court has personal jurisdiction over the Defendant and venue is proper in the
Southern District of Florida because many of the acts and transactions constituting the violations
alleged in this complaint occurred in this District.  Moreover, Defendant resided in the Southern
District  of  Florida  when  the  acts  and  transactions  alleged  in  this  complaint  occurred  and
Sanomedics had its principal office in this District.
15. In  connection  with  the  conduct  alleged  in  the  complaint,  Defendant,  directly  or
indirectly,  singly  or  in  concert  with  others,  made  use  of  the  means  or  instrumentalities  of
interstate commerce or the mails.
THE FRAUD SCHEME
A. The Fraudulent Offer and Sale of Sanomedics Stock

16. In  2009,  Houlihan,  together  with  Sanomedics’  co-founder,  hired  an  unregistered
broker  and  his  boiler  room  operation  (the  “Boiler  Room  Operator”)  to  solicit,  offer,  and  sell
shares of Sanomedics stock to the public.
17. Beginning  in  2009  and  continuing  until  approximately  2015,  the  Boiler  Room
Operator supervised the boiler room sales agents as they solicited prospective investors, through
cold calling, to raise approximately $21 million from the fraudulent sale of shares of Sanomedics
stock to about 700 investors nationwide.
18. From  May  2009  to  May  2010,  Houlihan  also  personally  solicited  investors  to
purchase  Sanomedics  shares  falsely  telling  them  that,  for  a  limited  time,  he  was  able  to  offer  a

5
limited number of Sanomedics shares at a steep discount to the stock’s then current quoted price
on the OTCBB.
19. Houlihan and the co-founder used money received from Sanomedics’ investors to
pay  undisclosed  sales  commissions,  fees,  and  other  monetary  distributions  to  the  Boiler  Room
Operator,  the  sales  agents,  and  to  themselves.    Houlihan  knew  that  approximately  50%  of
investors’ proceeds were paid as commissions and fees to the sales agents and the Boiler Room
Operator, and as monetary payments to himself and others.
20. Defendant,   as   Sanomedics’   president,   signed   Sanomedics’   stock   certificates
representing ownership interests for investors who bought shares from the boiler room operation.
21. From  2013  until  2015,  Houlihan  received  approximately  $110,106  in  proceeds
from the fraudulent sale of Sanomedics stock for his own personal benefit and use.
B. Material Misrepresentations and Omissions to Sanomedics Investors
1.  False Promise Offering Sanomedics Shares at a Steep Discount
22. Beginning in May 2009 until May 2010, Houlihan solicited prospective investors
by  telling  them  that,  for  a  limited  time,  he  was  able  to  offer  them  a  limited  number  of
Sanomedics  shares  at  a  steep  discount  to  the  stock’s  then  current  quoted  price  on  the  OTCBB.
Houlihan  knew  his  statement  to  investors  was  false  because  he  controlled  the  number  of
Sanomedics  shares  and  authorized  stock  splits  to  generate  those  shares.  And,  contrary  to  his
representation  to  investors  that  he  was  selling  them  Sanomedics  shares  at  a  steep  discount,  at
least  two  investors  purchased  shares  at  $1.50  per  share  when  the  then  prevailing  quoted  price
was no greater than $0.20.

6
2.  False Filings that Omitted the Boiler Room Operation
23. In  his  capacity  as  Sanomedics’  president,  Houlihan  signed  Sanomedics’  periodic
filings with the Commission, including its fiscal years 2013 and 2014 annual reports (Forms 10-
K), and its quarterly filings (Forms 10-Q) during that same period.  Those filings contained false
statements  and  statements  that  were  rendered  false  or  misleading  by  the  failure  to  disclose  that
Sanomedics was obtaining substantial financing through the fraudulent sale of stock by the boiler
room.
24. Sanomedics’  2013  Form  10-K/A  falsely  stated  that  the  cash  received  from
financing activities during the fiscal year came primarily from the issuance of convertible notes
and from debt issued to an affiliate of the co-founder.  In fact, the money was not a loan, but was
instead raised from the issuance of stock sold by the undisclosed boiler room.
25. Sanomedics’  2014  Form  10-K  falsely  portrayed  its  financing  as  principally  the
issuance  of  debt.    In  fact,  Sanomedics’  principal  source  of  financing  was  the  funds  it  received
from the boiler room.
C.        Scheme Conduct

26. Houlihan engaged in a long running scheme to defraud investors using the Boiler-
Room  Operator’s  operation.    Houlihan  hired  the  Boiler  Room  Operator  and  used  the  Boiler
Room Operator’s unlicensed sales agents to market and sell Sanomedics’ stock.  Houlihan used
at least 50% of the investor proceeds to pay sales commissions and fees to the sales agents—and
to   himself—without   disclosing   those   payments   to   investors.   After   investors   purchased
Sanomedics  stock,  Houlihan  signed  stock  certificates  representing  an  ownership  interest  in
Sanomedics’ shares sold by the boiler room.

7
COUNT I
Fraud in the Offer or Sale of Securities in Violation of
Section 17(a)(1) of the Securities Act

27. The Commission repeats and realleges Paragraphs 1 through 26 of this Complaint
as if fully set forth herein.
28. Beginning no later than 2009 and continuing through in or about August 2015, the
Defendant,  directly  and  indirectly,  by  use  of  the  means  or  instruments  of  transportation  or
communication in interstate commerce and by use of the mails, in the offer or sale of securities,
knowingly or recklessly employed devices, schemes or artifices to defraud.
29. By  reason  of  the  foregoing,  the  Defendant  directly  and  indirectly  violated,  and
unless enjoined, is reasonably likely to continue to violate, Section 17(a)(1) of the Securities Act,
15 U.S.C. § 77q(a)(1).
COUNT II

Fraud in the Offer or Sale of Securities in Violation of
Section 17(a)(2) of the Securities Act

30. The Commission repeats and realleges Paragraphs 1 through 26 of this Complaint
as if fully set forth herein.
31. Beginning no later than 2009 and continuing through in or about August 2015, the
Defendant,  directly  and  indirectly,  by  use  of  the  means  or  instruments  of  transportation  or
communication  in  interstate  commerce  and  by  the  use  of  the  mails,  in  the  offer  or  sale  of
securities,  negligently  obtained  money  or  property  by  means  of  untrue  statements  of  material
facts and omissions to state material facts necessary to make the statements made, in the light of
the circumstances under which they were made, not misleading.

8
32. By  reason  of  the  foregoing,  the  Defendant  directly  and  indirectly  violated,  and
unless enjoined, is reasonably likely to continue to violate, Section 17(a)(2) of the Securities Act,
15 U.S.C. § 77q(a)(2).
COUNT III
Fraud in the Offer or Sale of Securities in
Violation of Section 17(a)(3) of the Securities Act

33. The Commission repeats and realleges Paragraphs 1 through 26 of this Complaint
as if fully set forth herein.
34. Beginning no later than 2009 and continuing through in or about August 2015, the
Defendant,  directly  and  indirectly,  by  use  of  the  means  or  instruments  of  transportation  or
communication  in  interstate  commerce  and  by  the  use  of  the  mails,  in  the  offer  or  sale  of
securities negligently engaged in acts, transactions, practices and courses of business which have
operated as a fraud or deceit upon purchasers and prospective purchasers of such securities.
35. By  reason  of  the  foregoing,  the  Defendant  directly  and  indirectly  violated,  and
unless enjoined, is reasonably likely to continue to violate, Section 17(a)(3) of the Securities Act,
15 U.S.C. § 77q(a)(3).
COUNT IV
Fraud in the Purchase or Sale of Securities in Violation
of Section 10(b) and Rule 10b-5 of the Exchange Act

36. The Commission repeats and realleges Paragraphs 1 through 26 of this Complaint
as if fully set forth herein.
37. Beginning no later than 2009 and continuing through in or about August 2015, the
Defendant,  in  connection  with  the  purchase  or  sale  of  securities,  by  the  use  of  means  or
instrumentalities  of  interstate  commerce  or  of  the  mails,  directly  or  indirectly  knowingly  or
recklessly, (a) employed devices, schemes, or artifices to defraud; (b) made untrue statements of

9
material facts or omitted to state material facts necessary in order to make the statements made,
in the light of the circumstances under which they were made, not misleading; or (c) engaged in
acts, practices, or courses of business which operated as a fraud or deceit upon other persons.
38. By  reason  of  the  foregoing,  the  Defendant  directly  and  indirectly  violated,  and
unless  enjoined,  is  reasonably  likely  to  continue  to  violate,  Section  10(b)  of  the  Exchange  Act,
15 U.S.C. § 78j(b), and Rule 10b-5, 17 C.F.R. § 240.10b-5, thereunder.
COUNT V
Aiding and Abetting the Unlawful Operation of a
Broker-Dealer not Registered with the Commission in
Violation of  Exchange Act Section 15(a)

39.  The Commission repeats and realleges paragraphs 1 through 26 of this Complaint
as if fully restated herein.
40. Beginning no later than 2009 and continuing through in or about August 2015, the
Boiler  Room  Operator  made  use  of  the  emails  or  means  or  instrumentalities  of  interstate
commerce  to  effect  transactions  in,  or  to  induce  or  attempt  to  induce,  the  purchase  or  sale  of
securities,  without  being  registered  as  a  broker  or  dealer,  or  being  associated  with  a  registered
broker or dealer in accordance with Section 15(b) of the Exchange Act, 15 U.S.C. § 78o(b).
41. Beginning  no  later  than  2009  and  continuing  through  in  or  about  August  2015,
Defendant Houlihan knowingly or recklessly provided substantial assistance to the Boiler Room
Operator in his violations of Section 15(a) of the Exchange Act, 15 U.S.C. § 78o(a).
42. By  reason  of  the  foregoing  acts,  Defendant  Houlihan  aided  and  abetted  and,
unless enjoined, is reasonably likely to continue to aid and abet violations of Section 15(a) of the
Exchange Act, 15 U.S.C. § 78o(a).

10
COUNT VI
Aiding and Abetting Sanomedics’ Violations of Section 13(a) of the Exchange Act and
Rules 12b-20, 13a-1 and 13a-13 Thereunder

43. The Commission repeats and realleges paragraphs 1 through 26 of this Complaint
as if fully restated herein.
44. Section  13(a)  of  the  Exchange  Act,  15  U.S.C.  §  78m(a),  requires  issuers  of
securities  registered  under  Section  12  of  the  Exchange  Act,  15  U.S.C.  §  78l,  to  file  reports  in
conformity  with  the  Commission’s  rules  and  regulations.    Rule  13a-1  of  the  Exchange  Act,  17
C.F.R.  §  240.13a-1,  requires  the  filing  of  accurate  annual  reports,  and  Rule  13a-13  of  the
Exchange  Act,  17  C.F.R.  §  240.13a-13,  requires  the  filing  of  accurate  quarterly  reports.    Rule
12b-20  of  the  Exchange  Act,  17  C.F.R.  §  240.12b-20,  requires  an  issuer  to  include  in  its  annual
and quarterly reports material information as may be necessary to make the required statements,
in light of the circumstances in which they are made, not misleading.
45. From  October  27,  2010  until  May  2,  2017,  Sanomedics  had  a  class  of  securities
registered pursuant to Section 12 of the Exchange Act, 15 U.S.C. § 78l, and was required to file
accurate  annual  and  quarterly  reports  with  the  Commission.    In  2014  and  2015,  Sanomedics
failed  to  comply  with  the  required  reporting  provisions  of  the  federal  securities  laws,  and  by
reason  of  the  foregoing,  violated  Section  13(a)  and  Rules  12b-20,  13a-1,  and  13a-13  of  the
Exchange Act, 15 U.S.C. § 78m(a) and 17 C.F.R. §§ 240.12b-20, 240.13a-1, and 240.13a-13.
46. In  2014  and  2015,  as  Sanomedics’  president,  Defendant  knowingly  or  recklessly
provided  substantial  assistance  to  Sanomedics’  violations  of  Section  13(a)  and  Rules  12b-20,
13a-1,  and  13a-13  of  the  Exchange  Act,  15  U.S.C.  §  78m(a)  and  17  C.F.R.  §§  240.12b-20,
240.13a-1, and 240.13a-13.

11
47. By reason of the foregoing, Defendant aided and abetted and, unless enjoined, is
reasonably likely to continue to aid and abet violations of Section 13(a) of the Exchange Act, 15
U.S.C.  §  78m(a),  and  Rules  12b-20,  13a-1,  and  13a-13  thereunder,  17  C.F.R.  §§  240.12b-20,
240.13a-1, and 240.13a-13.
COUNT VII
False Certifications in Violation of Exchange Act Rule 13a-14

48. The Commission repeats and realleges paragraphs 1 through 26 of this Complaint
as if fully restated herein.
49. In 2014 and 2015, Defendant Houlihan in violation Rule 13a-14 of the Exchange
Act,  directly  or  indirectly,  as  an  officer  or  director  of  an  issuer,  falsely  certified  in  annual  and
quarterly  reports  that  based  on  his  knowledge,  the  disclosure  reports  did  not  contain  an  untrue
statement  of  a  material  fact  or  omit  to  state  a  material  fact  necessary  in  order  to  make  the
statements  made,  in  light  of  the  circumstances  under  which  such  statements  were  made,  not
misleading with respect to the period covered by the report.
50. By  reason  of  the  foregoing,  Defendant  Houlihan,  directly  or  indirectly,  violated,
and, unless enjoined, is reasonably likely to continue to violate Rule 13a-14 of the Exchange Act,
17 C.F.R. § 240.13a-14.
RELIEF REQUESTED
            WHEREFORE,  the  Commission  respectfully  requests  that  the  Court  find  that  the
Defendant committed the violations of the federal securities laws alleged in this Complaint, and:
I.
Permanent Injunctive Relief
  Issue  a  Permanent  Injunction  enjoining  Defendant  Houlihan  from:  (1)  violating  Section
17(a) of the Securities Act, 15 U.S.C. § 77q(a), and Section 10(b) of the Exchange Act and Rule

12
10b-5  thereunder,  15  U.S.C.  §  78j(b)  and  17  C.F.R.  §  240.10b-5;  (2)  aiding  and  abetting
violations  of  Section  15(a)  of  the  Exchange  Act,  15  U.S.C.  §  78o(a);  (3)  aiding  and  abetting
violations of Section 13(a) and Rules 12b-20, 13a-1, and 13a-13 of the Exchange Act, 15 U.S.C.
§ 78m(a) and 17 C.F.R. §§ 240.12b-20, 240.13a-1, and 240.13a-13; and (4) violating Rule 13a-
14 of the Exchange Act, 17 C.F.R. § 240.13a-14.
II.
Disgorgement
  Issue  an  Order  directing  the  Defendant  to  disgorge  all  ill-gotten  profits  or  proceeds
received as a result of the acts and/or courses of conduct complained of herein, with prejudgment
interest thereon.
III.
Penny Stock Bar

  Issue  an  Order  pursuant  to  Section  20(g)  of  the  Securities  Act,  15  U.S.C.  §  77t(g),  and
Section  21(d)(6)  of  the  Exchange  Act,  15  U.S.C.  §  78u(d)(6),  permanently  barring  Defendant
from participating in any offering of a penny stock.
IV.
Officer and Director Bar
  Issue  an  Order  permanently  barring  Defendant  Houlihan  from  serving  as  an  officer  or
director  of  any  public  company  pursuant  to  Section  20(e)  of  the  Securities  Act,  15  U.S.C.  §
77t(e), and Section 21(d)(2) of the Exchange Act, 15 U.S.C. § 78u(d)(2).
V.
Further Relief
 Grant such other and further relief as may be necessary and appropriate.

UNITED STATES DISTRICT COURT 
SOUTHERN DISTRICT OF FLORIDA 

 
CASE NO.: ________________________                 

 
SECURITIES AND EXCHANGE COMMISSION, ) 
        ) 
   Plaintiff,    ) 
v.        ) 
        ) 
KEITH HOULIHAN,     ) 
        )   
   Defendant.    ) 
_______________________________________________ ) 
 

COMPLAINT FOR INJUNCTIVE AND OTHER RELIEF 
 

 Plaintiff Securities and Exchange Commission (“Commission”) alleges as follows: 
 

INTRODUCTION 
 

1. The Commission brings this action against Keith Houlihan (“Defendant”) for 

violating the antifraud and registration provisions of the federal securities laws. 

2. From April 2009, through August 2015, while he was president of Sanomedics 

International Holdings, Inc. (“Sanomedics”), Defendant participated in a fraudulent scheme that 

raised approximately $21 million from approximately 700 investors, by: (1) directly soliciting 

prospective investors to purchase Sanomedics shares based on false statements; (2) hiring a 

boiler room to pitch Sanomedics’ stock to prospective investors using false statements regarding 

the price and limited number of Sanomedics shares being sold; (3) supporting the boiler room by 

paying sales agents undisclosed commissions; and (4) signing Sanomedics’ periodic filings with 

the Commission that contained materially false and misleading statements and omissions 

regarding Sanomedics’ use of an illegal boiler room to finance its operations. 

3. From May 2009 to May 2010, Defendant solicited, offered and sold shares of 

Sanomedics stock to prospective investors falsely stressing that for a limited time only, a 

Case 9:18-cv-80585-XXXX   Document 1   Entered on FLSD Docket 05/04/2018   Page 1 of 13



 2

“limited number” of Sanomedics shares were available to investors for purchase at a steep 

discount to the current price of Sanomedics’ shares then quoted on the Over-the-Counter Bulletin 

Board (“OTCBB”), an electronic trading service that offers investors price and volume 

information for equity securities. 

4. Defendant used money received from Sanomedics’ investors to hire a boiler room 

operator to solicit prospective investors to purchase Sanomedics stock.  

5. Defendant used money received from Sanomedics’ investors for sales 

commissions, fees, and other monetary distributions to support a boiler room operation whose 

sales agents offered and sold Sanomedics stock. 

6. Defendant, as Sanomedics’ president, signed Sanomedics’ stock certificates 

representing ownership interests for investors who bought shares from the boiler room operation. 

7. Defendant signed Sanomedics’ false filings with the Commission that failed to 

disclose that Sanomedics was fraudulently raising money through a boiler room operation. 

8. Through his fraudulent conduct, the Defendant received over $100,000 of 

investors’ proceeds for his own personal benefit and use.   

9. Through this misconduct, Houlihan: (a) violated Section 17(a) of the Securities 

Act of 1933 (“Securities Act”) and Section 10(b) of the Securities Exchange Act of 1934 

(“Exchange Act”) and Rule 10b-5 thereunder; (b) aided and abetted the boiler room operator’s 

violations of Section 15(a) of the Exchange Act; (c) aided and abetted Sanomedics’ violations of 

Section 13(a) of the Exchange Act, and Rules 12b-20, 13a-1 and 13a-13 thereunder; and (d) 

violated Rule 13a-14 of the Exchange Act.  Unless enjoined, the Defendant is reasonably likely 

to engage in future violations of the federal securities laws.      

 
  

Case 9:18-cv-80585-XXXX   Document 1   Entered on FLSD Docket 05/04/2018   Page 2 of 13



 3

THE DEFENDANT 

10. Houlihan, age 50, was a resident of Boca Raton, Florida and the co-founder and 

president of Sanomedics.  Houlihan is not, and was not at the time of the conduct described 

herein, registered with the Commission as a broker or dealer.   

BACKGROUND OF SANOMEDICS 

11. Sanomedics, f/k/a “Sanomedics International Holdings, Inc.,” is a company 

incorporated in Delaware with its principal place of business in Miami, Florida.  It was 

purportedly in the business of developing and selling non-contact infrared thermometers.  

Sanomedics became a publicly-traded company in July 2009 through a reverse merger with a 

public shell company.  It was an SEC-reporting company and was quoted on OTC Link, which is 

operated by OTC Markets Group Inc., under the symbol “SIMH,” from October 27, 2010 until 

May 2, 2017, when the Commission filed a settled administrative proceeding against Sanomedics 

pursuant to Section 12(j) of the Exchange Act revoking its registration. 

12. Sanomedics’ stock is a “penny stock” as defined by the Exchange Act. At all 

times relevant to this action, the stock’s shares traded at less than one dollar per share. During 

the same time period, Sanomedics’ stock did not meet any of the exceptions to penny stock 

classification pursuant to Exchange Act Section 3(a)(51), 15 U.S.C. § 78c(a)(51), and Rule 3a51-

1, 17 C.F.R. § 240.3a51-1. For example Sanomedics’ stock: (a) did not trade on a national 

securities exchange; (b) was not an “NMS stock,” as defined in 17 C.F.R. § 242.600(b)(47); (c) 

did not have tangible assets (i.e., total assets less intangible assets and liabilities) in excess of 

$5,000,000; and (d) did not have average revenue of approximately $6,000,000 for the last three 

years.   

 

Case 9:18-cv-80585-XXXX   Document 1   Entered on FLSD Docket 05/04/2018   Page 3 of 13



 4

JURISDICTION AND VENUE 
 

13. This Court has jurisdiction over this action pursuant to Sections 20(b), 20(d) and 

22(a) of the Securities Act, 15 U.S.C. §§ 77t(b), 77t(d) and 77v(a); and Sections 21(d), 21(e), 

and 27(a) of the Exchange Act, 15 U.S.C. §§ 78u(d), 78u(e) and 78aa(a). 

14. This Court has personal jurisdiction over the Defendant and venue is proper in the 

Southern District of Florida because many of the acts and transactions constituting the violations 

alleged in this complaint occurred in this District.  Moreover, Defendant resided in the Southern 

District of Florida when the acts and transactions alleged in this complaint occurred and 

Sanomedics had its principal office in this District.   

15. In connection with the conduct alleged in the complaint, Defendant, directly or 

indirectly, singly or in concert with others, made use of the means or instrumentalities of 

interstate commerce or the mails. 

THE FRAUD SCHEME 

A. The Fraudulent Offer and Sale of Sanomedics Stock 
 

16. In 2009, Houlihan, together with Sanomedics’ co-founder, hired an unregistered 

broker and his boiler room operation (the “Boiler Room Operator”) to solicit, offer, and sell 

shares of Sanomedics stock to the public.   

17. Beginning in 2009 and continuing until approximately 2015, the Boiler Room 

Operator supervised the boiler room sales agents as they solicited prospective investors, through 

cold calling, to raise approximately $21 million from the fraudulent sale of shares of Sanomedics 

stock to about 700 investors nationwide.     

18. From May 2009 to May 2010, Houlihan also personally solicited investors to 

purchase Sanomedics shares falsely telling them that, for a limited time, he was able to offer a 

Case 9:18-cv-80585-XXXX   Document 1   Entered on FLSD Docket 05/04/2018   Page 4 of 13



 5

limited number of Sanomedics shares at a steep discount to the stock’s then current quoted price 

on the OTCBB.    

19. Houlihan and the co-founder used money received from Sanomedics’ investors to 

pay undisclosed sales commissions, fees, and other monetary distributions to the Boiler Room 

Operator, the sales agents, and to themselves.  Houlihan knew that approximately 50% of 

investors’ proceeds were paid as commissions and fees to the sales agents and the Boiler Room 

Operator, and as monetary payments to himself and others. 

20. Defendant, as Sanomedics’ president, signed Sanomedics’ stock certificates 

representing ownership interests for investors who bought shares from the boiler room operation. 

21. From 2013 until 2015, Houlihan received approximately $110,106 in proceeds 

from the fraudulent sale of Sanomedics stock for his own personal benefit and use. 

B. Material Misrepresentations and Omissions to Sanomedics Investors 

1.  False Promise Offering Sanomedics Shares at a Steep Discount  

22. Beginning in May 2009 until May 2010, Houlihan solicited prospective investors 

by telling them that, for a limited time, he was able to offer them a limited number of 

Sanomedics shares at a steep discount to the stock’s then current quoted price on the OTCBB. 

Houlihan knew his statement to investors was false because he controlled the number of 

Sanomedics shares and authorized stock splits to generate those shares. And, contrary to his 

representation to investors that he was selling them Sanomedics shares at a steep discount, at 

least two investors purchased shares at $1.50 per share when the then prevailing quoted price 

was no greater than $0.20. 

  

Case 9:18-cv-80585-XXXX   Document 1   Entered on FLSD Docket 05/04/2018   Page 5 of 13



 6

2.  False Filings that Omitted the Boiler Room Operation 

23. In his capacity as Sanomedics’ president, Houlihan signed Sanomedics’ periodic 

filings with the Commission, including its fiscal years 2013 and 2014 annual reports (Forms 10-

K), and its quarterly filings (Forms 10-Q) during that same period.  Those filings contained false 

statements and statements that were rendered false or misleading by the failure to disclose that 

Sanomedics was obtaining substantial financing through the fraudulent sale of stock by the boiler 

room. 

24. Sanomedics’ 2013 Form 10-K/A falsely stated that the cash received from 

financing activities during the fiscal year came primarily from the issuance of convertible notes 

and from debt issued to an affiliate of the co-founder.  In fact, the money was not a loan, but was 

instead raised from the issuance of stock sold by the undisclosed boiler room.    

25. Sanomedics’ 2014 Form 10-K falsely portrayed its financing as principally the 

issuance of debt.  In fact, Sanomedics’ principal source of financing was the funds it received 

from the boiler room. 

C.     Scheme Conduct 
 

26. Houlihan engaged in a long running scheme to defraud investors using the Boiler-

Room Operator’s operation.  Houlihan hired the Boiler Room Operator and used the Boiler 

Room Operator’s unlicensed sales agents to market and sell Sanomedics’ stock.  Houlihan used 

at least 50% of the investor proceeds to pay sales commissions and fees to the sales agents—and 

to himself—without disclosing those payments to investors. After investors purchased 

Sanomedics stock, Houlihan signed stock certificates representing an ownership interest in 

Sanomedics’ shares sold by the boiler room.   

  

Case 9:18-cv-80585-XXXX   Document 1   Entered on FLSD Docket 05/04/2018   Page 6 of 13



 7

COUNT I 

Fraud in the Offer or Sale of Securities in Violation of  
Section 17(a)(1) of the Securities Act 

 
27. The Commission repeats and realleges Paragraphs 1 through 26 of this Complaint 

as if fully set forth herein. 

28. Beginning no later than 2009 and continuing through in or about August 2015, the 

Defendant, directly and indirectly, by use of the means or instruments of transportation or 

communication in interstate commerce and by use of the mails, in the offer or sale of securities, 

knowingly or recklessly employed devices, schemes or artifices to defraud. 

29. By reason of the foregoing, the Defendant directly and indirectly violated, and 

unless enjoined, is reasonably likely to continue to violate, Section 17(a)(1) of the Securities Act, 

15 U.S.C. § 77q(a)(1). 

COUNT II 
 

Fraud in the Offer or Sale of Securities in Violation of  
Section 17(a)(2) of the Securities Act 

 
30. The Commission repeats and realleges Paragraphs 1 through 26 of this Complaint 

as if fully set forth herein. 

31. Beginning no later than 2009 and continuing through in or about August 2015, the 

Defendant, directly and indirectly, by use of the means or instruments of transportation or 

communication in interstate commerce and by the use of the mails, in the offer or sale of 

securities, negligently obtained money or property by means of untrue statements of material 

facts and omissions to state material facts necessary to make the statements made, in the light of 

the circumstances under which they were made, not misleading. 

Case 9:18-cv-80585-XXXX   Document 1   Entered on FLSD Docket 05/04/2018   Page 7 of 13



 8

32. By reason of the foregoing, the Defendant directly and indirectly violated, and 

unless enjoined, is reasonably likely to continue to violate, Section 17(a)(2) of the Securities Act, 

15 U.S.C. § 77q(a)(2). 

COUNT III 

Fraud in the Offer or Sale of Securities in 
Violation of Section 17(a)(3) of the Securities Act 

 
33. The Commission repeats and realleges Paragraphs 1 through 26 of this Complaint 

as if fully set forth herein. 

34. Beginning no later than 2009 and continuing through in or about August 2015, the 

Defendant, directly and indirectly, by use of the means or instruments of transportation or 

communication in interstate commerce and by the use of the mails, in the offer or sale of 

securities negligently engaged in acts, transactions, practices and courses of business which have 

operated as a fraud or deceit upon purchasers and prospective purchasers of such securities. 

35. By reason of the foregoing, the Defendant directly and indirectly violated, and 

unless enjoined, is reasonably likely to continue to violate, Section 17(a)(3) of the Securities Act, 

15 U.S.C. § 77q(a)(3). 

COUNT IV 

Fraud in the Purchase or Sale of Securities in Violation 
of Section 10(b) and Rule 10b-5 of the Exchange Act 

 
36. The Commission repeats and realleges Paragraphs 1 through 26 of this Complaint 

as if fully set forth herein. 

37. Beginning no later than 2009 and continuing through in or about August 2015, the 

Defendant, in connection with the purchase or sale of securities, by the use of means or 

instrumentalities of interstate commerce or of the mails, directly or indirectly knowingly or 

recklessly, (a) employed devices, schemes, or artifices to defraud; (b) made untrue statements of 

Case 9:18-cv-80585-XXXX   Document 1   Entered on FLSD Docket 05/04/2018   Page 8 of 13



 9

material facts or omitted to state material facts necessary in order to make the statements made, 

in the light of the circumstances under which they were made, not misleading; or (c) engaged in 

acts, practices, or courses of business which operated as a fraud or deceit upon other persons. 

38. By reason of the foregoing, the Defendant directly and indirectly violated, and 

unless enjoined, is reasonably likely to continue to violate, Section 10(b) of the Exchange Act, 

15 U.S.C. § 78j(b), and Rule 10b-5, 17 C.F.R. § 240.10b-5, thereunder.   

COUNT V 

Aiding and Abetting the Unlawful Operation of a  
Broker-Dealer not Registered with the Commission in 

Violation of  Exchange Act Section 15(a) 
 

39.  The Commission repeats and realleges paragraphs 1 through 26 of this Complaint 

as if fully restated herein. 

40. Beginning no later than 2009 and continuing through in or about August 2015, the 

Boiler Room Operator made use of the emails or means or instrumentalities of interstate 

commerce to effect transactions in, or to induce or attempt to induce, the purchase or sale of 

securities, without being registered as a broker or dealer, or being associated with a registered 

broker or dealer in accordance with Section 15(b) of the Exchange Act, 15 U.S.C. § 78o(b). 

41. Beginning no later than 2009 and continuing through in or about August 2015, 

Defendant Houlihan knowingly or recklessly provided substantial assistance to the Boiler Room 

Operator in his violations of Section 15(a) of the Exchange Act, 15 U.S.C. § 78o(a). 

42. By reason of the foregoing acts, Defendant Houlihan aided and abetted and, 

unless enjoined, is reasonably likely to continue to aid and abet violations of Section 15(a) of the 

Exchange Act, 15 U.S.C. § 78o(a). 

Case 9:18-cv-80585-XXXX   Document 1   Entered on FLSD Docket 05/04/2018   Page 9 of 13



 10

COUNT VI 

Aiding and Abetting Sanomedics’ Violations of Section 13(a) of the Exchange Act and 
Rules 12b-20, 13a-1 and 13a-13 Thereunder 

 
43. The Commission repeats and realleges paragraphs 1 through 26 of this Complaint 

as if fully restated herein. 

44. Section 13(a) of the Exchange Act, 15 U.S.C. § 78m(a), requires issuers of 

securities registered under Section 12 of the Exchange Act, 15 U.S.C. § 78l, to file reports in 

conformity with the Commission’s rules and regulations.  Rule 13a-1 of the Exchange Act, 17 

C.F.R. § 240.13a-1, requires the filing of accurate annual reports, and Rule 13a-13 of the 

Exchange Act, 17 C.F.R. § 240.13a-13, requires the filing of accurate quarterly reports.  Rule 

12b-20 of the Exchange Act, 17 C.F.R. § 240.12b-20, requires an issuer to include in its annual 

and quarterly reports material information as may be necessary to make the required statements, 

in light of the circumstances in which they are made, not misleading.   

45. From October 27, 2010 until May 2, 2017, Sanomedics had a class of securities 

registered pursuant to Section 12 of the Exchange Act, 15 U.S.C. § 78l, and was required to file 

accurate annual and quarterly reports with the Commission.  In 2014 and 2015, Sanomedics 

failed to comply with the required reporting provisions of the federal securities laws, and by 

reason of the foregoing, violated Section 13(a) and Rules 12b-20, 13a-1, and 13a-13 of the 

Exchange Act, 15 U.S.C. § 78m(a) and 17 C.F.R. §§ 240.12b-20, 240.13a-1, and 240.13a-13. 

46. In 2014 and 2015, as Sanomedics’ president, Defendant knowingly or recklessly 

provided substantial assistance to Sanomedics’ violations of Section 13(a) and Rules 12b-20, 

13a-1, and 13a-13 of the Exchange Act, 15 U.S.C. § 78m(a) and 17 C.F.R. §§ 240.12b-20, 

240.13a-1, and 240.13a-13. 

Case 9:18-cv-80585-XXXX   Document 1   Entered on FLSD Docket 05/04/2018   Page 10 of 13



 11

47. By reason of the foregoing, Defendant aided and abetted and, unless enjoined, is 

reasonably likely to continue to aid and abet violations of Section 13(a) of the Exchange Act, 15 

U.S.C. § 78m(a), and Rules 12b-20, 13a-1, and 13a-13 thereunder, 17 C.F.R. §§ 240.12b-20, 

240.13a-1, and 240.13a-13. 

COUNT VII 

False Certifications in Violation of Exchange Act Rule 13a-14 
 

48. The Commission repeats and realleges paragraphs 1 through 26 of this Complaint 

as if fully restated herein. 

49. In 2014 and 2015, Defendant Houlihan in violation Rule 13a-14 of the Exchange 

Act, directly or indirectly, as an officer or director of an issuer, falsely certified in annual and 

quarterly reports that based on his knowledge, the disclosure reports did not contain an untrue 

statement of a material fact or omit to state a material fact necessary in order to make the 

statements made, in light of the circumstances under which such statements were made, not 

misleading with respect to the period covered by the report.  

50. By reason of the foregoing, Defendant Houlihan, directly or indirectly, violated, 

and, unless enjoined, is reasonably likely to continue to violate Rule 13a-14 of the Exchange Act, 

17 C.F.R. § 240.13a-14. 

RELIEF REQUESTED 

 WHEREFORE, the Commission respectfully requests that the Court find that the 

Defendant committed the violations of the federal securities laws alleged in this Complaint, and: 

I. 

Permanent Injunctive Relief 

 Issue a Permanent Injunction enjoining Defendant Houlihan from: (1) violating Section 

17(a) of the Securities Act, 15 U.S.C. § 77q(a), and Section 10(b) of the Exchange Act and Rule 

Case 9:18-cv-80585-XXXX   Document 1   Entered on FLSD Docket 05/04/2018   Page 11 of 13



 12

10b-5 thereunder, 15 U.S.C. § 78j(b) and 17 C.F.R. § 240.10b-5; (2) aiding and abetting 

violations of Section 15(a) of the Exchange Act, 15 U.S.C. § 78o(a); (3) aiding and abetting 

violations of Section 13(a) and Rules 12b-20, 13a-1, and 13a-13 of the Exchange Act, 15 U.S.C. 

§ 78m(a) and 17 C.F.R. §§ 240.12b-20, 240.13a-1, and 240.13a-13; and (4) violating Rule 13a-

14 of the Exchange Act, 17 C.F.R. § 240.13a-14.   

II. 

Disgorgement 

 Issue an Order directing the Defendant to disgorge all ill-gotten profits or proceeds 

received as a result of the acts and/or courses of conduct complained of herein, with prejudgment 

interest thereon. 

III. 

Penny Stock Bar 

 
 Issue an Order pursuant to Section 20(g) of the Securities Act, 15 U.S.C. § 77t(g), and 

Section 21(d)(6) of the Exchange Act, 15 U.S.C. § 78u(d)(6), permanently barring Defendant 

from participating in any offering of a penny stock. 

IV. 

Officer and Director Bar  

 Issue an Order permanently barring Defendant Houlihan from serving as an officer or 

director of any public company pursuant to Section 20(e) of the Securities Act, 15 U.S.C. § 

77t(e), and Section 21(d)(2) of the Exchange Act, 15 U.S.C. § 78u(d)(2). 

V. 

Further Relief 

 Grant such other and further relief as may be necessary and appropriate.    

Case 9:18-cv-80585-XXXX   Document 1   Entered on FLSD Docket 05/04/2018   Page 12 of 13



Case 9:18-cv-80585-XXXX   Document 1   Entered on FLSD Docket 05/04/2018   Page 13 of 13


	Complaint Final
	Signature Page