UNITED STATES OF AMERICA

Before the

SECURITIES AND EXCHANGE COMMISSION

SECURITIES ACT OF 1933

Release No. 9908 / September 8, 2015

SECURITIES EXCHANGE ACT OF 1934

Release No. 75857 / September 8, 2015

ADMINISTRATIVE PROCEEDING

File No. 3-16795

 

:

In the Matter of : ORDER INSTITUTING ADMINISTRATIVE

: AND CEASE-AND-DESIST PROCEEDINGS

: PURSUANT TO SECTION 8A OF THE

Joseph J. Fox, : SECURITIES ACT OF 1933 AND 

: SECTION 15(b) OF THE SECURITIES 

: EXCHANGE ACT OF 1934, MAKING

: FINDINGS, IMPOSING REMEDIAL

Respondent. : SANCTIONS AND A CEASE-AND-DESIST

: ORDER AND NOTICE OF HEARING

 :

I.

The Securities and Exchange Commission ("Commission") deems it appropriate that public

administrative and cease-and-desist proceedings be, and hereby are, instituted pursuant to Section

8A of the Securities Act of 1933 ("Securities Act") and Section 15(b) of the Securities Exchange 

Act of 1934 (“Exchange Act”) against Joseph J. Fox (“Fox” or "Respondent").

II.

In anticipation of the institution of these proceedings, Respondent has submitted an Offer

of Settlement (the "Offer"), which the Commission has determined to accept. Solely for the

purpose of these proceedings and any other proceedings brought by or on behalf of the

Commission, or to which the Commission is a party, and without admitting or denying the 

findings herein, except as to the Commission's jurisdiction over him and the subject matter of 

these proceedings, which are admitted, and except as provided herein in Section VI, Respondent 

consents to the entry of this Order Instituting Administrative and Cease-and-Desist Proceedings 

Pursuant to Section 8A of the Securities Act of 1933 and Section 15(b) of the Securities 

Exchange Act of 1934, Making Findings, Imposing Remedial Sanctions and a Cease-and-Desist 

Order and Notice of Hearing ("Order"), as set forth below:
2

III.

On the basis of this Order and Respondent's Offer, the Commission finds1that:

Respondent

1. Joseph J. Fox, also known as Yosef Yehuda Fox, age 49, is a resident of Los 

Angeles, California. He is the current Chief Executive Officer of Ditto Holdings, Inc. and served 

as the Chief Executive Officer of Ditto Trade, Inc. from its inception until December 2014. Fox 

held various FINRA licenses between 1993 and 2003, and since 2010 he has held the following 

FINRA licenses: Series 7 (General Securities Representative), Series 24 (General Securities 

Principal), Series 28 (Introducing Broker/Dealer Financial and Operations Principal) and Series 

63 (Uniform Securities Agent State Law Examination). He was a registered representative with 

Ditto Trade from 2010 to December 2014. Fox voluntarily withdrew his broker’s license in 

December 2014.

Relevant Entity

2. Ditto Holdings, Inc. is a Delaware corporation with offices in Los Angeles, 

California and Chicago, Illinois.2 It is not registered with the Commission in any capacity. Ditto 

Holdings owns 100% of Ditto Trade, Inc. (“Ditto Trade”), an Illinois corporation with 

headquarters in Chicago, Illinois. According to its website, Ditto Trade is a “first-of-its-kind 

social brokerage firm.” Ditto Trade has been registered with the Commission as a broker-dealer 

pursuant to Section 15 of the Exchange Act since July 2010.

Ditto Holdings, Inc.’s Securities Offerings

3. As Chief Executive Officer and a member of the Board of Directors of Ditto 

Holdings, Fox played an integral role in Ditto Holdings’ efforts to raise capital. Among other 

things, Fox was involved in determining when Ditto Holdings would offer to sell securities, what 

types of securities it would offer to sell, the terms of the securities offerings, and the manner in 

which the securities offerings would be communicated to potential investors. 

4. From April 2009 to September 2013, Ditto Holdings raised approximately $10 

million from more than two hundred investors located throughout the United States through a 

series of common and preferred stock offerings as follows:

a. Ditto Holdings raised approximately $2.1 million from the sale of common 

stock to at least 68 individual investors from April 2009 to March 2012. At 

least 13 non-accredited investors purchased common stock from Ditto 

Holdings during those offerings.

 

1

The findings herein are made pursuant to Respondent's Offer of Settlement and are not binding on any other person 

or entity in this or any other proceeding. 

2 Ditto Holdings, Inc. was formed in December 2010 as a successor to FB Financial Group, Inc., an Illinois 

corporation that was formed in January 2009. Ditto Holdings changed its name to SoVesTech, Inc. in December 

2014. For simplicity, we refer to all of these entities as Ditto Holdings throughout this Order.
3

b. Ditto Holdings raised approximately $1.7 million from the sale of Series A 

preferred stock to at least 36 accredited investors from April 2011 to June 

2012.

c. Ditto Holdings raised approximately $2.6 million from the sale of Series B 

preferred stock to at least 39 individual investors from June 2012 to January 

2013. At least 10 non-accredited investors purchased preferred stock from 

Ditto Holdings during those offerings.

d. Ditto Holdings raised approximately $3.8 million from the sale of common 

stock to at least 104 individual investors from December 2012 to September 

2013. At least 31 non-accredited investors purchased common stock from 

Ditto Holdings during those offerings. 

5. Ditto Holdings did not maintain a complete and accurate set of financial records 

from its inception through at least September 2013. Ditto Holdings did not regularly prepare 

financial statements during that time period and has never had an audit performed on any of its 

financial statements.3

6. Ditto Holdings prepared offering documents for several of its securities offerings, 

but it did not provide the offering documents to everyone who was offered the opportunity to 

purchase its securities. Further, the offering documents did not include financial statements or 

certain other required financial information about Ditto Holdings, and Ditto Holdings did not 

otherwise provide this information to any investors. 

7. Beginning in August 2012, Ditto Holdings entered into a series of agreements 

with Marc Mandel ("Mandel"). Under the agreements, Mandel agreed to co-develop with Ditto 

Holdings an internet-based radio show covering the stock markets and provided a number of 

services to Ditto Holdings, including, among other things, advice on marketing, product 

offerings, industry trends, and investor offerings. Mandel also hosted a radio program, on which 

Ditto Trade advertised, and distributed an investing newsletter. Mandel introduced his newsletter 

subscribers to Ditto Holding's securities offerings and also to Ditto Trade's features and services. 

From September 2012 to September 2013, Ditto Holdings paid Mandel at least $265,000 and 

granted him warrants to purchase more than 800,000 shares of Ditto Holdings’ common stock at 

a favorable exercise price. 

8. Mandel sent numerous emails to his roughly 350 newsletter subscribers about 

Ditto Holdings and hosted a series of online webinars and in-person meetings for investors with 

Fox.

9. From late 2012 to September 2013, more than seventy of Mandel’s subscribers 

purchased securities from Ditto Holdings at a total cost of approximately $3.7 million. 

 

3 Ditto Trade, Ditto Holdings’ sole operating subsidiary, has had its financial statements audited annually since 

2010. Some investors were provided with certain historical and projected financial information about Ditto Trade. 
4

10. No registration statement was filed in connection with any of Ditto Holdings’ 

securities offerings, and an exemption from registration was not available to all of the 

transactions.

Fox’s Sales of Ditto Holdings, Inc. Securities

11. At the time that Ditto Holdings was formed in 2009, it issued shares of common 

stock to its founders, including Fox.

12. Beginning in February 2013, Fox discussed selling some of Fox’s shares of Ditto 

Holdings common stock with Mandel. Fox discussed with Mandel whether any of his newsletter 

subscribers were interested in purchasing any of the shares. Fox provided Mandel with a stock 

purchase agreement, which included instructions for how to wire investment funds to Fox, and 

told Mandel that the stock purchase agreement was the only document interested purchasers 

would need to complete.

13. In March 2013, Mandel began sending emails to some of his roughly 350 

newsletter subscribers praising Ditto Holdings and telling them about the opportunity to buy 

shares of Ditto Holdings stock. When individuals indicated an interest in buying shares of Ditto 

Holdings stock, Mandel provided them with a copy of the stock purchase agreement and told 

them to contact Fox if they needed more information.

14. From April 2013 to July 2013, approximately 28 of Mandel’s subscribers 

purchased approximately 1.21 million shares of stock from Fox at a total cost of approximately 

$1.25 million. Fox did not sell shares to anyone who was not associated with Mandel. 

15. During the same period, Fox paid Mandel at least $124,000 in three installments. 

The payments Fox made to Mandel corresponded to roughly 10% of the amount of Fox’s sales.

16. Neither Fox nor anyone acting on his behalf took any steps to determine whether 

any of the individuals who purchased Fox’s shares of Ditto Holdings stock were sophisticated

investors. At least two of the purchasers had previously identified themselves to Ditto Holdings 

as non-accredited investors.

17. The investors did not have access to financial statements or other required 

information about Ditto Holdings in connection with Fox’s sales of Ditto Holdings common 

stock.

18. No registration statement was filed in connection with any of Ditto Holdings’ 

securities, and no exemption from registration was applicable to Fox’s sales.
5

Violation

19. As a result of the conduct described above, Fox willfully violated Sections 5(a) 

and 5(c) of the Securities Act, which prohibit the direct or indirect offer and sale of securities 

through the mails or interstate commerce unless a registration statement has been filed or is in 

effect or an exemption from registration is available.

4

IV.

In view of the foregoing, the Commission deems it appropriate to impose the sanctions

agreed to in Respondent's Offer.

Accordingly, pursuant to Section 8A of the Securities Act and Section 15(b) of the 

Exchange Act, it is hereby ORDERED that:

1. Respondent Fox cease and desist from committing or causing any violations and any 

future violations of Sections 5(a) and 5(c) of the Securities Act;

2. Respondent shall pay disgorgement of $125,210, which represents profits gained as 

a result of the conduct described herein, prejudgment interest of $5,426, and a civil penalty of 

$75,000 to the Securities and Exchange Commission. Payment shall be made in the following 

installments:

(1) $10,000 within 14 days of entry of this Order;

(2) $10,000 within 104 days of entry of this Order;

(3) $10,000 within 194 days of entry of this Order; and 

(4) $175,636 within 284 days of entry of this Order.

If any payment is not made by the date the payment is required by this Order, the entire 

outstanding balance of disgorgement, prejudgment interest and civil penalties, plus any 

additional interest accrued pursuant to SEC Rule of Practice 600 or pursuant to 31 U.S.C. 3717, 

shall be due and payable immediately, without further application. Payment must be made in one 

of the following ways: 

(1) Respondent may transmit payment electronically to the Commission, which 

will provide detailed ACH transfer/Fedwire instructions upon request; 

 

4 A willful violation of the securities laws means merely “‘that the person charged with the duty knows what he is 

doing.’” Wonsover v. SEC, 205 F.3d 408, 414 (D.C. Cir. 2000) (quoting Hughes v. SEC, 174 F.2d 969, 977 (D.C. 

Cir. 1949)). There is no requirement that the actor “‘also be aware that he is violating one of the Rules or Acts.’” Id.

(quoting Gearhart & Otis, Inc. v. SEC, 348 F.2d 798, 803 (D.C. Cir. 1965)).
6

(2) Respondent may make direct payment from a bank account via Pay.gov 

through the SEC website at http://www.sec.gov/about/offices/ofm.htm; or 

(3) Respondent may pay by certified check, bank cashier’s check, or United 

States postal money order, made payable to the Securities and Exchange 

Commission and hand-delivered or mailed to: 

Enterprise Services Center

Accounts Receivable Branch

HQ Bldg., Room 181, AMZ-341

6500 South MacArthur Boulevard

Oklahoma City, OK 73169

Payments by check or money order must be accompanied by a cover letter identifying Joseph Fox

as a Respondent in these proceedings, and the file number of these proceedings; a copy of the 

cover letter and check or money order must be sent to Anne C. McKinley, Assistant Regional 

Director, Division of Enforcement, Securities and Exchange Commission, Chicago Regional Office, 

175 West Jackson Boulevard, Suite 900, Chicago, Illinois 60604.

IT IS FURTHER ORDERED, pursuant to Rule 100(c) of the Commission’s Rules of 

Practice, 17 C.F.R. § 201.100(c), in the interest of justice and without prejudice to any party to the 

proceeding, that a public hearing for the purpose of taking evidence on the questions set forth in 

Section V hereof shall be convened at a time and place to be fixed by, and before, an Administrative 

Law Judge to be designated by further order as provided by Rule 110 of the Commission’s Rules of 

Practice, 17 C.F.R. § 201.110.

If Respondent Fox fails to appear at a hearing after being duly notified, he may be deemed 

in default and the proceedings may be determined against him upon consideration of this Order, the 

allegations of which may be deemed to be true as provided by Rules 155(a), 221(f), and 310 of the 

Commission’s Rules of Practice, 17 C.F.R. §§ 201.155(a), 201.221(f), and 201.310.

This Order shall be served forthwith upon Respondent Fox as provided for in the 

Commission’s Rules of Practice.

IT IS FURTHER ORDERED that the Administrative Law Judge shall issue an initial 

decision no later than 300 days from the date of service of this Order, pursuant to Rule 360(a)(2) of 

the Commission’s Rules of Practice.

V.

Pursuant to this Order, Respondent agrees to additional proceedings in this proceeding to 

determine what, if any, additional non-financial remedial sanctions against Respondent pursuant 

to Section 15(b)(6) of the Exchange Act are in the public interest. In connection with such 

additional proceedings: (a) Respondent agrees that he will be precluded from arguing that he did 

not violate the federal securities laws as described in this Order; (b) Respondent agrees that he 

may not challenge the validity of this Order; (c) solely for the purposes of such additional 
7

proceedings, the findings of this Order shall be accepted as and deemed true by the hearing 

officer; and (d) the hearing officer may determine the issues raised in the additional proceedings 

on the basis of affidavits, declarations, excerpts of sworn deposition or investigative testimony, 

and documentary evidence or in-person testimony at a public hearing.

VI.

It is further Ordered that, solely for purposes of exceptions to discharge set forth in 

Section 523 of the Bankruptcy Code, 11 U.S.C. §523, the findings in this Order are true and 

admitted by Respondent, and further, any debt for disgorgement, prejudgment interest, civil 

penalty or other amounts due by Respondent under this Order or any other judgment, order, 

consent order, decree or settlement agreement entered in connection with this proceeding, is a 

debt for the violation by Respondent of the federal securities laws or any regulation or order 

issued under such laws, as set forth in Section 523(a)(19) of the Bankruptcy Code, 11 U.S.C. 

§523(a)(19).

VII.

In the absence of an appropriate waiver, no officer or employee of the Commission engaged 

in the performance of investigative or prosecuting functions in this or any factually related 

proceeding will be permitted to participate or advise in the decision of this matter, except as witness 

or counsel in proceedings held pursuant to notice. Since this proceeding is not “rule making” within 

the meaning of Section 551 of the Administrative Procedure Act, it is not deemed subject to the 

provisions of Section 553 delaying the effective date of any final Commission action.

By the Commission.

Brent J. Fields

Secretary