Allegation notice. Allegations from the cited record; outcomes noted where adjudicated.
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CIK 0000013156 · SDI → Galaxy Gaming

Secured Diversified → Galaxy Gaming — Foreclosing on the Client

Secured Diversified Investment, Ltd. (SDI) was a Nevada reporting shell Jan Wallace ran as CEO and Chair. The enterprise's own July 2005 memo states the design in one line — “sell the shell, take SDI private.” Cane Clark LLP, SDI's SEC counsel of record, laundered the restricted stock through the Iomega opinion-letter / Doney sequence, then in July 2008 filed an involuntary Chapter 11 against its own former client. The joint plan extinguished all existing SDI equity and delivered the public shell to Galaxy Gaming, Inc. — a buyer Cane Clark itself introduced — for 25,000,000 insider shares.

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How it worked

The same firm that signed SDI's SEC filings appeared as petitioning creditor foreclosing on the registrant. SDI's sole officer Munjit Johal — simultaneously CFO of Davi Skin — consented to involuntary relief with no directors' meeting, took $84,000, and testified under oath at the § 341 meeting that the Galaxy Gaming merger “was introduced by Cane Clark” and negotiated by “Kylene Cane or Bryant Clark,” not the debtor. The Joint Plan extinguished existing equity, issued 25,000,000 shares to Galaxy principal Robert Saucier's group and 4,000,000 pro-rata to unsecured creditors, and transferred the registrant's CIK and ticker to the new owners — a concurrent conflict of interest (Nev. R. Prof. Conduct 1.7, 1.9) executed on the public bankruptcy record. Investor Clifford Strand, left holding nothing, sued.

Open the filed qui tam complaint at this section — the operative pleading (United States ex rel.), jumped to the matching allegation; the filed PDF is one click away.

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Forensic brief

The complete forensic brief behind this summary — the full record with exhibits. Page through it below, or open it larger for the document summary and key relations.

Forensic brief — Secured Diversified → Galaxy Gaming 1 / —
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Book Corp → Secure Diversified: the host shell

Like every entity in the enterprise, Secured Diversified Investment, Ltd. (“SDI”) began life as a reporting public shell to be captured rather than built. The vehicle was a Nevada registrant whose SEC reporting history and trading ticker — not any operating business — were the asset of value. Jan M. Wallace installed herself as CEO and Chair, holding the registrant the same way she had held MW Medical and Davi Skin: as a public listing waiting to be re-floated to a new owner.1

SDI carried a thin veneer of real-estate holdings, but the corporate record shows the same structural pattern as the other shells: a registrant under Cane/Wallace control, with Cane Clark LLP serving as SEC counsel of record — the law firm positioned to engineer the exit.

  1. Secure Diversified Investment, Ltd., Nevada Secretary of State entity record; Wallace Dep., Medley v. Wallace, No. CV 06-3370 R (SSx) (C.D. Cal. Dec. 20, 2006), at 432–434 (Wallace identifies herself as CEO of Secured Diversified Investments prior to stepping down).
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“Sell the shell, take SDI private”

The premeditation is in the enterprise’s own words. The Yablon Enterprises, Inc. (“YEI”) “Less Is More” memorandum — from Leonard F. Yablon to SDI’s Clifford L. Strand and Jan M. Wallace, dated 6 July 2005 and circulated internally by Wallace on 12 July 2005 — directed a 4-to-1 reverse split and then to sell the Shell, taking SDI private, while conditioning a proposed $5,000,000 YEI investment on SDI “becoming a PRIVATE company” and liquidating its real-estate holdings “NLT 30 Sept 05.”321

… implementing a 4 to 1 Reverse Split, Then sell the Shell, and thus “taking of SDI PRIVATE NLT 31 Dec 2006” to focus on making real gelt.YEI “Less Is More” Memorandum re Secure Diversified Inv., circulated by Jan M. Wallace (Jul. 12, 2005)

The memo is direct documentary evidence of the shell-trafficking business model: the public registrant was never an investment to be operated, only an instrument to be separated from its public float and delivered to a buyer. Three years later the bankruptcy filing executed exactly that design.2

  1. YEI “Less Is More” Memorandum re Secure Diversified Inv. (4-to-1 reverse split, then “sell the Shell … taking of SDI PRIVATE NLT 31 Dec 2006”; cleanup and real-estate liquidation “NLT 30 Sept 05”), Email from Leonard F. Yablon, J.D. (Yablon Enterprises, Inc.) to Clifford L. Strand & Jan M. Wallace (Jul. 6, 2005; circulated by Wallace Jul. 12, 2005).
  2. Forensic research brief — Secure Diversified Inv. Co. (SDI) → Galaxy Gaming shell takeover and bankruptcy strip.54
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The Iomega opinion-letter / Doney sequence

Before the shell could be re-floated, its restricted stock had to be made free-trading. Between June and October 2006, a sequence of Cane Clark legal opinions — paired with ghost-written letters attributed to attorney Scott Doney — was used to launder restricted SDI shares into the public market under the cover of the Iomega opinion-letter template.55

The mechanism is the enterprise’s legal-laundering signature: the same law firm that served as SEC counsel of record produced the very opinions that removed the restrictive legends, converting locked insider stock into salable float. The opinion letters supplied a paper basis for transfer agents to lift restrictions that, on the facts, should never have been lifted.1

  1. Forensic sub-brief — Cane Clark, Wallace, Doney: Iomega opinion-letter sequence and the SDI shell cycle (Jun.–Oct. 2006); 17 C.F.R. § 230.144.
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Involuntary Chapter 11 → reorganization into Galaxy Gaming

On 30 July 2008, Cane Clark LLP filed an involuntary Chapter 11 petition against SDI — the same firm that had served as SDI’s SEC counsel of record now appearing as the petitioning creditor foreclosing on its own former client. SDI consented to the order for relief without a board meeting, and a Joint Plan of Reorganization was filed jointly by the debtor and petitioning creditor Cane Clark on 3 October 2008.34

The Plan centered on a share exchange delivering the registrant’s public shell to Galaxy Gaming, Inc., a Las Vegas table-games company introduced to SDI by Cane Clark itself. Under the Plan: all existing SDI equity was extinguished; Galaxy’s insiders (principal Robert Saucier) received 25,000,000 shares of new common stock, becoming the majority owners of the reorganized company; and unsecured creditors received a pro-rata 4,000,000 shares. The registrant’s CIK and ticker passed to the new owners.1

An attorney foreclosing on her client through the petitioning-creditor mechanism, then proposing the plan that hands the client’s public shell to a buyer she introduced — a concurrent conflict of interest under Nev. R. Prof. Conduct 1.7 and 1.9, executed on the public bankruptcy record.

  1. First Amended Disclosure Statement & Joint Plan of Reorganization, In re Secured Diversified Investment, Ltd., No. 08-16332-lbr, Dkt. 48 (Bankr. D. Nev. Oct. 3, 2008) (petition filed Jul. 30, 2008; existing equity extinguished; 25,000,000 shares to Galaxy insiders, 4,000,000 to unsecured creditors); David W. Huston, counsel for Debtor; John J. Laxague, Cane Clark LLP, for petitioning creditor.
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The Johal testimony: counsel directing the merger

At the § 341 meeting of creditors on 18 September 2008, SDI’s sole officer and director Munjit Johal — who had replaced Wallace as CEO and Chair in January 2008, and who was simultaneously CFO of Davi Skin — placed the operative facts on the record under oath.33 Asked who filed the bankruptcy, Johal confirmed: “This case was filed involuntarily by Cane Clark” — “Yes.” He had signed the consent to involuntary relief as CEO with no directors’ meeting, and received $84,000 in connection with the engagement.1

On the Galaxy Gaming reverse merger, Johal testified the buyer “was introduced by Cane Clark” and that the terms were negotiated by Cane Clark — not by the debtor — naming “Kylene Cane or Bryant Clark” as the source. He had met Galaxy principal Robert Saucier in person only one week before the meeting. Johal’s sworn declaration in the case corroborates the counsel-directed structure of the transaction.662

  1. Transcript of § 341 Meeting of Creditors, In re Secured Diversified Investment, Ltd., No. 08-16332-lbr, at 66–70 (Bankr. D. Nev. Sept. 18, 2008) (appearance of “Joel Laxague on behalf of Cane Clark”; Johal consents to involuntary relief without a directors’ meeting; receives $84,000).
  2. Id. at 52–53 (“it was introduced by Cane Clark”; “Kylene Cane or Bryant Clark”; first met Saucier one week prior); Declaration of Munjit Johal, In re Secured Diversified Investment, Ltd. (Bankr. D. Nev. Oct. 17, 2008).
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Strand v. Wallace: the defrauded investor

The cost of the strip is recorded in the litigation it produced. Clifford L. Strand — the SDI principal to whom the Yablon “Less Is More” investment proposal had been addressed — sued Wallace and SDI on 4 May 2006, alleging investor fraud and misrepresentation in the conduct that culminated in the Galaxy Gaming takeover.63

The Strand complaint frames SDI not as an isolated failure but as another iteration of the enterprise template: a public registrant captured under Cane/Wallace control, its restricted stock laundered through Cane Clark opinion letters, its equity extinguished through an attorney-directed involuntary bankruptcy, and its public shell delivered to a new owner — leaving the outside investors who funded the entity holding nothing.1

  1. Strand v. Wallace (Secured Diversified Inv.), No. 06CC02350 (Cal. Super. Ct., Orange Cnty. May 4, 2006); 15 U.S.C. §§ 78j(b), 78ff · 17 C.F.R. § 240.10b-5 · 18 U.S.C. §§ 1343, 1962(c).
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Documents

Four records that bracket the SDI shell takeover: the Nevada charter of Western Investments Partners — the secret Cane-Wallace vehicle behind it — the enterprise's own July 2005 take-private memo, the defrauded investor's complaint, and the bankruptcy § 341 examination where Johal testified Cane Clark introduced the Galaxy Gaming buyer.

Western Investments Partners — WIP Articles of Incorporation · 18 Jul 2005
Western Investments Partners — WIP Articles of Incorporation 1 / —
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The Nevada Articles of Incorporation of Western Investments Partners, Inc. (“WIP”, Entity E0458192005-2), forwarded to Wallace under Grace Sim's 26 July 2005 “FW: Articles” email — the filed, Secretary-of-State-stamped charter of the secret vehicle behind the SDI takeover.

  1. Cane Clark is the resident agent. The filing is accepted over Kyleen Cane's own signature, at 3273 E. Warm Springs Road — the enterprise's law firm stands up its own takeover vehicle.
  2. The ‘outside investor’ is a founding director. Andy (Amin) Lakha is named director no. 2, alongside Patrick McNevin and Jan Wallace — the man later paraded before SDI as independent capital was inside the controllers’ vehicle from day one.
  3. Wallace’s bookkeeper incorporates it. Grace Sim, who kept Wallace’s personal accounts, is the named incorporator — the “independent” entity was formed and hand-delivered by the controllers’ own staff.
  4. Its members then filled SDI. WIP’s people — McNevin as an SDI “independent” director, Richman as the sole audit-committee member — populated the public company WIP was formed to take over.
YEI “Less Is More” memo · 12 Jul 2005
YEI “Less Is More” memo 1 / —
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Memorandum from Leonard F. Yablon (Yablon Enterprises, Inc.) to SDI — Clifford L. Strand (Chair) and Jan M. Wallace (President) — dated 6 July 2005 and circulated internally by Wallace on 12 July 2005.

  1. Sell the shell, verbatim. The memo directs “implementing a 4-to-1 Reverse Split, Then sell the Shell, and thus ‘taking of SDI PRIVATE NLT 31 Dec 2006’ to focus on making real gelt.”
  2. Cleanup on a deadline. It conditions a proposed $5.0M YEI investment on SDI “becoming a PRIVATE company,” liquidating all real estate, and completing the cleanup “NLT 30 Sept 05.”
  3. Brackets the takeover from the front. Documentary premeditation a year before the Strand investor suit and three years before the §341 bankruptcy that took the shell private.
Strand v. Wallace / SDI — complaint · 4 May 2006
Strand v. Wallace / SDI — complaint 1 / —
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  1. No clean audit. The complaint pleads the financial misrepresentations behind the SDI books — numbers no independent audit ever reconciled.
  2. Property transferred to Wallace. SDI assets were moved to Wallace and related parties, ahead of the defrauded outside investors.
  3. Insiders billed the entity. Wallace and associates drew salary and accrued expenses against SDI while it was being hollowed — the salary-against-entity signature of an enterprise member.
  4. Steered into bankruptcy. The investor dispute was converted into a Chapter 11 with Wallace positioned as the sole secured creditor she controlled.
SDI bankruptcy § 341 meeting transcript · 18 Sep 2008
SDI bankruptcy § 341 meeting transcript 1 / —
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  1. Cane Clark steered the buyer. Johal testified under oath that Cane Clark introduced the Galaxy Gaming buyer — the § 1145 shell sale that laundered the entity into free-trading stock.
  2. Sole secured creditor takes priority. Wallace's manufactured secured claim sits ahead of every outside investor in the § 341 record.
  3. Insider claims against the estate. The examination surfaces the insiders' accrued expenses and claims billed to SDI.
  4. Outside investors extinguished. The bankruptcy wipes the Strand-class investors while insiders retain the value.
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Timeline

  1. Pre-2005Wallace installs herself as CEO/Chair of Secured Diversified Investment, Ltd. (SDI), a Nevada reporting shell; Cane Clark LLP serves as SEC counsel of record.
  2. 6 Jul 2005Yablon Enterprises “Less Is More” email to Clifford Strand & Wallace conditions a $5M investment on SDI going private and liquidating real estate before Sept. 30, 2005.
  3. 12 Jul 2005Wallace circulates the YEI memo directing a 4-to-1 reverse split, then “sell the Shell, and thus ‘taking of SDI PRIVATE NLT 31 Dec 2006’ to focus on making real gelt” — with the cleanup and real-estate liquidation to be completed “NLT 30 Sept 05.”
  4. Jun–Oct 2006Cane Clark opinion letters paired with ghost-written Scott Doney letters (the Iomega sequence) launder restricted SDI stock into free-trading float.
  5. 4 May 2006Clifford Strand sues Wallace and SDI for investor fraud and misrepresentation (No. 06CC02350, Orange Cnty.).
  6. Jan 2008Munjit Johal replaces Wallace as SDI's sole officer and director, while simultaneously serving as CFO of Davi Skin.
  7. 30 Jul 2008Cane Clark LLP files an involuntary Chapter 11 petition against its own former client SDI; SDI consents to the order for relief with no board meeting.
  8. 18 Sep 2008At the § 341 meeting, Johal testifies the bankruptcy was “filed involuntarily by Cane Clark” and the Galaxy Gaming merger was introduced and negotiated by Cane Clark.
  9. 3 Oct 2008Joint Plan of Reorganization extinguishes all SDI equity; 25,000,000 shares issued to Galaxy Gaming insiders (Robert Saucier), 4,000,000 to unsecured creditors; the shell becomes Galaxy Gaming.
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Named parties

  • Kyleen Cane / Cane Clark LLP (SEC counsel of record · petitioning creditor · introduced the buyer)
  • Jan M. Wallace (SDI CEO/Chair; “sell the shell” memo)
  • Munjit Johal (SDI sole officer & Davi Skin CFO; consented to involuntary relief; $84,000)
  • John J. (Joel) Laxague & Bryant Clark (Cane Clark)
  • Scott Doney (ghost-written opinion letters)
  • Robert Saucier (Galaxy Gaming principal; reverse-merger buyer)
  • Clifford L. Strand (defrauded investor / plaintiff)
  • Leonard F. Yablon / Yablon Enterprises, Inc. (YEI)
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Citations & pleadings