Initial Decision Release No. 1352

Administrative Proceeding

File No. 3-18107

UNITED STATES OF AMERICA

Before the

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

In the Matter of

E-Waste Systems, Inc.

Initial Decision 

February 14, 2019

Appearances: Sonia G. Torrico and Virginia M. Rosado Desilets 

for the Division of Enforcement, 

Securities and Exchange Commission

Martin Nielson for Respondent

Before: Brenda P. Murray, Chief Administrative Law Judge

Background

On August 10, 2017, the Securities and Exchange Commission issued an 

order instituting proceedings (OIP) against Respondent under Section 12(j) of 

the Securities Exchange Act of 1934. The allegations are that Respondent 

has common stock registered with the Commission pursuant to Section 12(g) 

of the Exchange Act and is delinquent in its required periodic filings since its 

most recent filing was a Form 10-Q for the quarter ended September 30, 

2014. OIP at 1.

A different administrative law judge was originally assigned to this case, 

and in that phase of the proceeding, Martin Nielson, CEO of E-Waste 

Systems, Inc., filed an answer acknowledging that E-Waste is delinquent in 

its filing obligations and estimating that it would take up to eighteen weeks 

to raise funds and prepare the missing reports. Answer at 1-2 (filed Sept. 22, 

2017). The Division of Enforcement filed a motion for summary disposition 

on October 10, 2017, to which Respondent never filed an opposition. On that 

record, the previous administrative law judge issued an initial decision 

against Respondent. E-Waste Sys., Inc., Initial Decision Release No. 1229, 

2017 SEC LEXIS 3661 (ALJ Nov. 21, 2017).
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However, the Commission vacated that decision following the Supreme 

Court’s decision in Lucia v. SEC, 138 S. Ct. 2044 (2018). See Pending Admin. 

Proc., Securities Act of 1933 Release No. 10536, 2018 SEC LEXIS 2058, at *2-

3 (Aug. 22, 2018). The matter was then reassigned to me to provide 

Respondent with the opportunity for a new hearing. Pending Admin. Proc., 

Admin. Proc. Rulings Release No. 5955, 2018 SEC LEXIS 2264, at *2, *4 

(ALJ Sept. 12, 2018). In accordance with the Commission’s order of August 

22, 2018, I directed the parties to propose how further proceedings should be 

conducted. E-Waste Sys., Inc., Admin. Proc. Rulings Release No. 6049, 2018 

SEC LEXIS 2542, at *1-2 (ALJ Sept. 20, 2018). Respondent did not submit a 

proposal. On October 10, 2018, the Division of Enforcement submitted a 

proposal in which it represented that it was unable to contact Respondent.

I found that Respondent was previously served with the OIP and that it 

answered. E-Waste Sys., Inc., Admin. Proc. Rulings Release No. 6401, 2018 

SEC LEXIS 3511, at *1 (ALJ Dec. 13, 2018). Because Respondent had 

previously participated in the proceeding, my office reached out to the 

Division as well as Respondent’s CEO, Martin Nielson, by email on 

November 27, 2018, asking them to propose dates and times for a prehearing 

conference. Mr. Nielson promptly replied to the email and stated that he 

would propose a time after speaking with his attorney. But Mr. Nielson 

never corresponded further with my office or with the Division. Therefore, I 

issued an order to show cause stating that if Respondent did not respond, I 

would proceed based on the existing record due to its failure to file a proposal 

or participate in this proceeding after remand. Id. at *2-3. Respondent did 

not respond to the order to show cause.

Accordingly, this decision is based on the existing record consisting of 

Respondent’s answer, the Division’s motion for summary disposition, and the 

Division’s reply.1 I also take official notice of Respondent’s filings with the 

Commission on its EDGAR database. 17 C.F.R. § 201.323 (official notice may 

be taken of “any matter in the public official records of the Commission”). I 

have deemed as true those allegations in the OIP that Respondent did not 

deny. See 17 C.F.R. § 201.220(c) (“Any allegation not denied shall be deemed 

admitted.”).

 

1 The Division’s motion for summary disposition includes a declaration of 

Sonia G. Torrico, Esq., and Exhibits A through M. As requested by the 

Division in a motion dated October 11, 2017, I have used the revised version 

of the declaration and exhibits filed on October 11, 2017, which omits the 

accidentally filed nonpublic Exhibit A and removes the paragraph of the 

Torrico declaration referencing Exhibit A.
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I have proceeded under the Commission’s instruction to not give weight 

to or otherwise presume the correctness of any prior opinions, orders, or 

rulings issued by the prior administrative law judge. Pending Admin. Proc., 

2018 SEC LEXIS 2058, at *4.

Factual Findings

E-Waste, Central Index Key No. 1488309, is a revoked Nevada

corporation located in Las Vegas, Nevada. Div. Ex. D at 1. As E-Waste

concedes, it has not filed a periodic report since it filed a Form 10-Q for the 

period ended September 30, 2014. Answer at 1; see Div. Exs. K, L; Div. Ex. M 

at 462. E-Waste, stock symbol EWSI, is listed on OTC Link as a “grey 

market” stock due to a lack of current information following the ten-businessday trading suspension issued by the Commission on the same day as the 

OIP. Div. Ex. B; OTC Mkts. Grp., EWSI: E-Waste Systems, Inc., 

OTCMarkets, https://www.otcmarkets.com/stock/EWSI/overview (last 

accessed Feb. 13, 2019).2

In its final periodic report, E-Waste stated that it incurred net losses of 

$9,535,593 and $4,707,375 during the nine months ended September 30, 

2014, and 2013, respectively, and that it does not have enough cash to handle 

debt repayments or operating expenses. E-Waste Systems, Inc., Quarterly 

Report at F-4 (Form 10-Q) (Nov. 14, 2014). It stated that “to continue as a 

going concern,” it would need additional capital. Id. It planned to “seek 

equity and/or debt financing,” but noted that “management cannot provide 

any assurances that the Company will be successful in accomplishing any of 

its plans.” Id.

In December 2016, the Commission’s Division of Corporation Finance 

sent E-Waste a delinquency letter concerning its failure to meet its reporting 

obligations. See Torrico Decl. ¶ 10; Div. Ex. H. Because it failed to maintain 

a current address on file with the Commission, E-Waste did not receive this 

letter. See Answer at 1; Torrico Decl. ¶ 11; Div. Ex. I.

 

2 I take official notice of E-Waste’s listing on OTC Link. See 17 C.F.R. 

§ 201.323 (allowing official notice to “be taken of any material fact which 

might be judicially noticed by a district court”); Ganino v. Citizens Utilities 

Co., 228 F.3d 154, 166 n.8 (2d Cir. 2000) (“the district court may take judicial 

notice of well-publicized stock prices”); CMG Worldwide, Inc. v. Glaser, No. 

1:14-cv-928, 2015 WL 133742, at *1 (S.D. Ind. Jan. 9, 2015) (taking judicial 

notice of stock quotes and company profile downloaded from the OTC 

Markets website).
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Positions of the Parties

The Division maintains that the registration of E-Waste should be 

revoked because it has failed to file periodic reports for several years, and the 

public interest weighs heavily in favor of revocation.

In its answer, Respondent admits that it is delinquent in filing its 

periodic reports, but requests additional time to raise capital, hire auditors,

and become compliant with its reporting obligations.

Conclusions of Law

Under Rule 250(b), an administrative law judge may grant a motion for 

summary disposition in a 30-day proceeding if “there is no genuine issue with 

regard to any material fact and . . . the movant is entitled to summary 

disposition as a matter of law.” 17 C.F.R. § 201.250(b). Generally, “summary 

disposition is appropriate” in 12(j) proceedings “where the issuer has not 

disputed the facts that constitute the violation.” Citizens Capital Corp., 

Exchange Act Release No. 67313, 2012 SEC LEXIS 2024, at *35 (June 29, 

2012). E-Waste concedes “that it is delinquent in [its] filing obligations.” 

Answer at 1. No material facts are otherwise in dispute.

Exchange Act Section 13(a) and Rules 13a-1 and 13a-13 require issuers 

of securities registered with the Commission pursuant to Exchange Act 

Section 12 to file with the Commission current and accurate information in 

annual and quarterly reports, even if the registration is voluntary under 

Exchange Act Section 12(g). 17 C.F.R. §§ 240.13a-1, .13a-13. Compliance 

with these reporting requirements is mandatory. America’s Sports Voice, 

Inc., Exchange Act Release No. 55511, 2007 SEC LEXIS 1241, at *12 (Mar. 

22, 2007), recons. denied, Exchange Act Release No. 55867, 2007 SEC LEXIS 

1239 (June 6, 2007). Scienter is not required to establish violations of 

Exchange Act Section 13(a) and rules thereunder. SEC v. McNulty, 137 F.3d 

732, 740-41 (2d Cir. 1998). By failing to timely file required annual and 

quarterly reports, Respondent violated Exchange Act Section 13(a) and Rules 

13a-1 and 13a-13.

Sanction

Under Exchange Act Section 12(j), the Commission is authorized, “as it 

deems necessary or appropriate for the protection of investors,” to revoke the 

registration of a security or suspend the registration for a period not 

exceeding twelve months if it finds, after notice and an opportunity for 

hearing, that the issuer of the security has failed to comply with any 

provision of the Exchange Act or rules thereunder. 15 U.S.C. § 78l(j). In 
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determining what sanctions will adequately protect investors, the 

Commission “consider[s], among other things, the seriousness of the issuer’s 

violations, the isolated or recurrent nature of the violations, the degree of 

culpability involved, the extent of the issuer’s efforts to remedy its past 

violations and ensure future compliance, and the credibility of its assurances, 

if any, against further violations.” Gateway Int’l Holdings, Inc., Exchange 

Act Release No. 53907, 2006 SEC LEXIS 1288, at *19-20 (May 31, 2006). 

Respondent’s failures to file required periodic reports are serious because 

they violate a central provision of the Exchange Act. The purpose of periodic 

reporting is “to supply investors with current and accurate financial 

information about an issuer so that they may make sound [investment] 

decisions.” Id. at *26. The reporting requirements are the primary tool that 

Congress “fashioned for the protection of investors from negligent, careless, 

and deliberate misrepresentations” in the sale of securities. Eagletech 

Commc’ns, Inc., Exchange Act Release No. 54095, 2006 SEC LEXIS 1534, at 

*12 (July 5, 2006) (quoting SEC v. Beisinger Indus. Corp., 552 F.2d 15, 18 

(1st Cir. 1977)). 

Respondent’s violations are recurrent. It has not filed periodic reports 

since November 2014—more than four years ago. See Nature’s Sunshine 

Prods., Inc., Exchange Act Release No. 59268, 2009 SEC LEXIS 81, at *20 

(Jan. 21, 2009) (failing to file seven required periodic reports due over a twoyear period is recurrent); Impax Labs., Inc., Exchange Act Release No. 57864, 

2008 SEC LEXIS 1197, at *25-26 (May 23, 2008) (respondent’s failure to 

make eight filings over an eighteen-month period considered recurrent). 

Respondent is culpable because it knew of its obligation to file periodic 

reports. Answer at 1. In any event, scienter is not necessary to establish 

grounds for revocation. See China-Biotics, Inc., Exchange Act Release 

No. 70800, 2013 SEC LEXIS 3451, at *37 & n.60 (Nov. 4, 2013). 

In its answer, filed in September 2017, Respondent claimed that it 

needed less than six months to become current. Answer at 1-2. But, well 

over a year later, there is no indication that it has made any progress.

Respondent admits it will need more than $100,000 to complete audits and 

file reports, but provides no indication of where such a sum would come from, 

other than trading on the open market. Id. Respondent has failed to file 

another year’s worth of reports since filing its answer, presumably increasing 

the cost of becoming current. Respondent further admits that “[t]here can be 

no assurance that the funding sources will become available.” Id. at 2. EWaste also gives no assurance that it will be able to remain current, even if it 

managed to file all past due reports.
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E-Waste claims that it would be in the best interest of its investors for it 

to continue to trade in the public markets so it can raise capital, file its 

reports, and carry out its business plan. Id. at 2. However, as the 

Commission and federal courts have long held, reporting is the cornerstone of 

the securities laws, and shareholders are best served by having up-to-date 

information about a company. See Beisinger, 552 F.2d at 18; Eagletech, 2006 

SEC LEXIS 1534, at *11-12. Shareholders have not had current financial

information about E-Waste for over four years. And Respondent has made no 

attempt to participate in this iteration of the proceeding to provide any 

further update on the status of its business or its efforts to remedy its 

reporting violations.

On these facts, it is necessary and appropriate for the protection of 

investors to revoke the registrations of each class of Respondent’s registered 

securities. 

Order

The Division of Enforcement’s motion for summary disposition is 

GRANTED.

I ORDER that, pursuant to Section 12(j) of the Securities Exchange Act 

of 1934, the registration of each class of registered securities of E-Waste 

Systems, Inc., is REVOKED.3

This initial decision shall become effective in accordance with and 

subject to the provisions of Rule of Practice 360. 17 C.F.R. § 201.360. 

Pursuant to that Rule, I FURTHER ORDER that a party may file a petition 

for review of this initial decision within twenty-one days after service of the 

initial decision. 17 C.F.R. § 201.360(b). A party may also file a motion to 

correct a manifest error of fact within ten days of the initial decision, 

pursuant to Rule of Practice 111. 17 C.F.R. § 201.111. If a motion to correct 

a manifest error of fact is filed by a party, then a party shall have twenty-one 

days to file a petition for review from the date of the order resolving such 

motion to correct a manifest error of fact. This initial decision will not 

become final until the Commission enters an order of finality. The 

Commission will enter an order of finality unless a party files a petition for 

review or motion to correct a manifest error of fact or the Commission 

determines on its own initiative to review the initial decision as to a party. If 

 

3 This order applies to all classes of Respondent’s securities registered 

under Section 12 of the Exchange Act, whether or not such securities are 

specifically identified by ticker symbol or otherwise in this initial decision.
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any of these events occur, the initial decision shall not become final as to that 

party.

_______________________________

Brenda P. Murray

Chief Administrative Law Judge