FROM: U.S. SECURITIES AND EXCHANGE COMMISSION
06/04/2015 05:30 PM EDT
The Securities and Exchange Commission today announced an emergency asset freeze of two U.S. brokerage accounts connected to schemes to manipulate Avon and other stocks, thwarting any ability to cash in on ill-gotten proceeds.
According to an SEC complaint filed in federal court in Manhattan, the agency has tracked a filing on its EDGAR system last month about a false Avon tender offer to a foreign entity using an IP address located in Sofia, Bulgaria. A Bulgarian trader named Nedko Nedev controlled at least one of the two now-frozen brokerage accounts, and his account held a substantial position in Avon contracts-for-difference (CFDs) that were losing value in recent months. The SEC alleges that Nedev generated approximately $5,000 in excess profits by selling almost half of the account’s Avon CFDs at inflated prices after the EDGAR filing led to a 20-percent increase in the value of Avon stock on May 14.
The court issued an order at the SEC’s request freezing the two accounts, which contain approximately $2 million in assets.
“Only three weeks after the manipulation of Avon stock occurred, this emergency court order keeps not only the alleged illicit profits from being transferred offshore, but preserves the SEC’s ability to recover substantial penalties,” said Andrew Ceresney, Director of the SEC Enforcement Division.
In addition to Nedev, the SEC’s complaint charges Strategic Capital Partners Muster Ltd. and Strategic Wealth Investments Inc., which each own one of the brokerage accounts, and PTG Capital Partners LTD, which made the EDGAR filing containing the purported Avon tender offer. Also charged is similarly named PST Capital Group LTD, which allegedly made a false EDGAR filing in a 2012 scheme involving the stock of Rocky Mountain Chocolate Factory. The defendants also are charged with a similar scheme in 2014 involving Tower Group International Ltd., which involved a false press release instead of an EDGAR filing. The schemes followed similar patterns where the accounts had substantial holdings in a company that had been losing value and the companies’ stock values substantially increased after a false filing or press release originating from Bulgaria. The two accounts profited by more than $20,000 combined from the Tower Group alleged manipulation.
“We used parallel trading analysis to connect the dots and track down these defendants,” said Daniel M. Hawke, Chief of the SEC Enforcement Division’s Market Abuse Unit. “Even when traders attempt to hide behind proxy servers, false filings, and phony foreign entities, we are able to quickly identify patterns and relationships to focus our investigation and identify who is behind the manipulative trading.”
The SEC’s complaint charges the defendants with violating antifraud provisions of the federal securities laws, including Section 17(a) of the Securities Act of 1933, Sections 10(b) and 14(e) of the Securities Exchange Act of 1934, and Rules 10b-5 and 14e-8. The complaint also charges Nedev with control person and other secondary liability under Sections 20(a) and 20(b) of the Exchange Act. The complaint seeks disgorgement, penalties, and other related relief.
The SEC’s investigation, which is continuing, is being conducted by David Snyder, Kelly Gibson, John Rymas, Patrick McCluskey, and Assunta Vivolo in the Market Abuse Unit. The case is being supervised by Mr. Hawke and the unit’s co-deputy chiefs Robert Cohen and Joseph Sansone. The litigation will be led by David Axelrod and John Donnelly of the SEC’s Philadelphia Regional Office.
Showing posts with label STOCK PRICE MANIPULATION. Show all posts
Showing posts with label STOCK PRICE MANIPULATION. Show all posts
Saturday, June 6, 2015
Wednesday, December 17, 2014
SEC CHARGES OIL AND GAS CO & EXECS IN STOCK PRICE MANIPULATION CASE
FROM: U.S. SECURITIES AND EXCHANGE COMMISSION
2/15/2014 02:10 PM EST
The Securities and Exchange Commission today charged a New Orleans-based oil-and-gas company and five executives with running a stock trading scheme in which they claimed to have struck oil in Belize in order to manipulate the price of the company’s stock as they illegally sold restricted shares to the public.
The SEC also charged a Houston-based attorney with facilitating the scheme by issuing false legal opinion letters that allowed free trading of the restricted company stock.
According to the SEC’s complaint filed in U.S. District Court for the Eastern District of Texas, Treaty Energy Company issued deceptive press releases touting drilling successes in Belize and Texas to induce investor demand for its unregistered stock, which was then illegally distributed to the public. The SEC alleges that Treaty Energy’s founder Ronald Blackburn and four company officers – Andrew V. Reid, Bruce A. Gwyn, Lee C. Schlesinger, and Michael A. Mulshine – obtained at least $3.5 million in illicit profits from the scheme.
“Treaty Energy professed to be in the oil-and-gas business, but its real business seems to have been misleading investors,” said David Peavler, Associate Director for Enforcement in the SEC’s Fort Worth Regional Office. “These company officers were behind press releases and SEC filings announcing drilling successes that were simply falsehoods designed to deceive the market and put investor money into their own pockets.”
The SEC’s complaint further alleges that Treaty Energy’s outside counsel Samuel Whitley abused his gatekeeper role and enabled the scheme by authoring improper legal opinion letters that allowed the company and its officers to illegally distribute unregistered stock to the public. Whitley was aware that Blackburn was running the company and Treaty Energy was abusing registration rules under the federal securities laws. Yet these facts did not deter him from issuing the opinion letters that allowed the scheme to proceed.
“This case highlights the importance of gatekeepers in the sale of securities. Attorneys and other gatekeepers have an obligation to stop frauds, not enable them by turning a blind eye,” said David Woodcock, Director of the SEC’s Fort Worth Regional Office.
According to the SEC’s complaint, the scheme had three basic components. The first part began in January 2012 when Blackburn directed Treaty Energy to issue a press release claiming that its purported oil strike in Belize contained an estimated five to six million barrels of recoverable oil. Treaty’s stock price shot up nearly 80 percent that day. However, the Belize government publicly refuted Treaty Energy’s purported oil strike the very next day, calling the company’s statement “false and misleading” and “irresponsible.” The SEC alleges that despite Belize’s denial, Blackburn and the company’s officers continued to mislead investors by claiming that Belize was merely downplaying an actual oil strike for strategic reasons.
The SEC alleges that the second part of the scheme entailed Treaty Energy’s failure to disclose in public filings from 2009 to 2013 that Blackburn – previously convicted of federal income tax evasion – actually controlled the company and was a de facto officer. The SEC alleges that Reid, Gwyn, Schlesinger, and Mulshine all knew Blackburn’s true role at the company, but intentionally kept this fact out of its disclosures to conceal from the public that a convicted felon was in charge.
According to the SEC’s complaint, the final part of the scheme got underway in November 2013 when Treaty Energy began offering investors working interests in a well in West Texas. Investors were enticed with claims that the working interests were low-risk and expected to yield a return of 111.42 percent over a 10-year period. The SEC alleges that Treaty Energy and its officers knew these claims were baseless because the well was producing only marginal amounts of oil. In fact, the well produced 235 total barrels from October 2013 to October 2014.
The SEC’s complaint charges Treaty Energy, Blackburn, Reid, Gwyn, Mulshine, and Schlesinger with securities fraud as well as violations of the registration and reporting violations of the federal securities laws. The SEC seeks disgorgement of ill-gotten gains with prejudgment interest plus financial penalties as well as penny stock bars, officer-and-director bars, and permanent injunctions against them. Reid and Gwyn are additionally charged with signing false certifications in Treaty Energy’s SEC filings, and Whitley is accused of securities registration violations.
The SEC’s investigation was conducted by Samantha Martin, Keith Hunter, and Joann Harris of the Fort Worth Regional Office. The SEC’s litigation will be led by Jessica Magee.
2/15/2014 02:10 PM EST
The Securities and Exchange Commission today charged a New Orleans-based oil-and-gas company and five executives with running a stock trading scheme in which they claimed to have struck oil in Belize in order to manipulate the price of the company’s stock as they illegally sold restricted shares to the public.
The SEC also charged a Houston-based attorney with facilitating the scheme by issuing false legal opinion letters that allowed free trading of the restricted company stock.
According to the SEC’s complaint filed in U.S. District Court for the Eastern District of Texas, Treaty Energy Company issued deceptive press releases touting drilling successes in Belize and Texas to induce investor demand for its unregistered stock, which was then illegally distributed to the public. The SEC alleges that Treaty Energy’s founder Ronald Blackburn and four company officers – Andrew V. Reid, Bruce A. Gwyn, Lee C. Schlesinger, and Michael A. Mulshine – obtained at least $3.5 million in illicit profits from the scheme.
“Treaty Energy professed to be in the oil-and-gas business, but its real business seems to have been misleading investors,” said David Peavler, Associate Director for Enforcement in the SEC’s Fort Worth Regional Office. “These company officers were behind press releases and SEC filings announcing drilling successes that were simply falsehoods designed to deceive the market and put investor money into their own pockets.”
The SEC’s complaint further alleges that Treaty Energy’s outside counsel Samuel Whitley abused his gatekeeper role and enabled the scheme by authoring improper legal opinion letters that allowed the company and its officers to illegally distribute unregistered stock to the public. Whitley was aware that Blackburn was running the company and Treaty Energy was abusing registration rules under the federal securities laws. Yet these facts did not deter him from issuing the opinion letters that allowed the scheme to proceed.
“This case highlights the importance of gatekeepers in the sale of securities. Attorneys and other gatekeepers have an obligation to stop frauds, not enable them by turning a blind eye,” said David Woodcock, Director of the SEC’s Fort Worth Regional Office.
According to the SEC’s complaint, the scheme had three basic components. The first part began in January 2012 when Blackburn directed Treaty Energy to issue a press release claiming that its purported oil strike in Belize contained an estimated five to six million barrels of recoverable oil. Treaty’s stock price shot up nearly 80 percent that day. However, the Belize government publicly refuted Treaty Energy’s purported oil strike the very next day, calling the company’s statement “false and misleading” and “irresponsible.” The SEC alleges that despite Belize’s denial, Blackburn and the company’s officers continued to mislead investors by claiming that Belize was merely downplaying an actual oil strike for strategic reasons.
The SEC alleges that the second part of the scheme entailed Treaty Energy’s failure to disclose in public filings from 2009 to 2013 that Blackburn – previously convicted of federal income tax evasion – actually controlled the company and was a de facto officer. The SEC alleges that Reid, Gwyn, Schlesinger, and Mulshine all knew Blackburn’s true role at the company, but intentionally kept this fact out of its disclosures to conceal from the public that a convicted felon was in charge.
According to the SEC’s complaint, the final part of the scheme got underway in November 2013 when Treaty Energy began offering investors working interests in a well in West Texas. Investors were enticed with claims that the working interests were low-risk and expected to yield a return of 111.42 percent over a 10-year period. The SEC alleges that Treaty Energy and its officers knew these claims were baseless because the well was producing only marginal amounts of oil. In fact, the well produced 235 total barrels from October 2013 to October 2014.
The SEC’s complaint charges Treaty Energy, Blackburn, Reid, Gwyn, Mulshine, and Schlesinger with securities fraud as well as violations of the registration and reporting violations of the federal securities laws. The SEC seeks disgorgement of ill-gotten gains with prejudgment interest plus financial penalties as well as penny stock bars, officer-and-director bars, and permanent injunctions against them. Reid and Gwyn are additionally charged with signing false certifications in Treaty Energy’s SEC filings, and Whitley is accused of securities registration violations.
The SEC’s investigation was conducted by Samantha Martin, Keith Hunter, and Joann Harris of the Fort Worth Regional Office. The SEC’s litigation will be led by Jessica Magee.
Tuesday, October 21, 2014
SEC SANCTIONS HIGH FREQUENCY TRADING FIRM FOR ATTEMPTING TO MANIPULATE CLOSING NASDAQ PRICES
FROM: U.S. SECURITIES AND EXCHANGE COMMISSION
The Securities and Exchange Commission sanctioned a New York City-based high frequency trading firm for placing a large number of aggressive, rapid-fire trades in the final two seconds of almost every trading day during a six-month period to manipulate the closing prices of thousands of NASDAQ-listed stocks. This marks the first high frequency trading manipulation case.
An SEC investigation found that Athena Capital Research used an algorithm that was code-named Gravy to engage in a practice known as “marking the close” in which stocks are bought or sold near the close of trading to affect the closing price. The massive volumes of Athena’s last-second trades allowed Athena to overwhelm the market’s available liquidity and artificially push the market price – and therefore the closing price – in Athena’s favor. Athena was acutely aware of the price impact of its algorithmic trading, calling it “owning the game” in internal e-mails.
Athena agreed to pay a $1 million penalty to settle the SEC’s charges.
“When high frequency traders cross the line and engage in fraud we will pursue them as we do with anyone who manipulates the markets,” said SEC Chair Mary Jo White.
According to the SEC’s order instituting a settled administrative proceeding, although Athena was a relatively small firm, it dominated the market in the last few seconds of a trading day for stocks that it otherwise traded only slightly. The manipulative trading described in the SEC’s order occurred from June to December 2009 and made up more than 70 percent of the total NASDAQ trading volume of the affected stocks in the seconds before the market close.
“Traders today can certainly use complex algorithms and take advantage of cutting-edge technology, but what happened here was fraud,” said Andrew J. Ceresney, Director of the SEC’s Division of Enforcement. “This action should send a clear message that the Commission and its Division of Enforcement have the expertise to investigate and charge even the most sophisticated fraudulent algorithmic trading strategies.”
The SEC’s order finds that Athena’s manipulative scheme focused on trading in order imbalances in securities at the close of the trading day. Imbalances occur when there are more orders to buy shares than to sell shares (or vice versa) at the close for any given stock. Every day at the close of trading, NASDAQ runs a closing auction to fill all on-close orders at the best price, one that is not too distant from the price of the stock just before the close. Athena placed orders to fill imbalances in securities at the close of trading, and then traded or “accumulated” shares on the continuous market on the opposite side of its order.
According to the SEC’s order, Athena’s algorithmic strategies became increasingly focused on ensuring that the firm was the dominant firm – and sometimes the only one – trading desirable stock imbalances at the end of each trading day. The firm implemented additional algorithms known as “Collars” to ensure that Athena’s orders received priority over other orders when trading imbalances. These eventually resulted in Athena’s imbalance-on-close orders being at least partially filled more than 98 percent of the time. Athena’s ability to predict that it would get filled on almost every imbalance order allowed the firm to unleash its manipulative Gravy algorithm to trade tens of thousands of stocks right before the close of trading. As a result, these stocks traded at artificial prices that NASDAQ then used to set the closing prices for on-close orders as part of its closing auction. Athena’s high frequency trading scheme enabled its orders to be executed at more favorable prices.
The SEC order censures Athena and finds that the firm violated Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5. Without admitting or denying the findings, Athena agreed to pay the $1 million penalty and cease and desist from committing or causing any future violations of the securities laws.
The SEC’s investigation was conducted by William Finkel, Peter Lamore, Preethi Krishnamurthy, and Alexander Vasilescu. The case was supervised by Michael Osnato. The Enforcement Division worked closely with the SEC’s Division of Economic Risk and Analysis and the Quantitative Analytics Unit. The SEC appreciates the assistance of the Financial Industry Regulatory Authority.
Wednesday, August 6, 2014
SEC CHARGES 4 PROMOTERS WITH MANIPULATING THE SECURITIES OF MICROCAP MARIJUANA-RELATED STOCKS
FROM: U.S. SECURITIES AND EXCHANGE COMMISSION
The SEC alleges that the four promoters bought inexpensive shares of thinly traded penny stock companies on the open market and conducted pre-arranged, manipulative matched orders and wash trades to create the illusion of an active market in these stocks. They then sold their shares in coordination with aggressive promotional campaigns that urged investors to buy the stocks because the prices were on the verge of rising substantially. However, these companies had little to no business operations at the time. The promoters reaped more than $2.5 million in illegal profits through their schemes.
Two of the companies manipulated in this case – GrowLife Inc. and Hemp Inc. – claim to be related to the medical marijuana industry. The SEC has issued an investor alert warning about possible scams involving marijuana-related investments, noting that fraudsters often exploit the latest growth industries to lure investors into stock manipulation schemes. Other schemes by these four promoters involved an oil-and-gas company – Riverdale Oil and Gas Corporation – and three other microcap stocks, ISM International, Allied Products Corp, and Aden Solutions.
The SEC was able to unearth the schemes through the work of its recently created Microcap Fraud Task Force.
“Our Microcap Fraud Task Force is taking direct aim at abusive practices and serial violators within the microcap markets like these four promoters seeking to exploit retail investors for personal gain,” said Michael Paley, co-chair of the SEC’s Microcap Fraud Task Force. “In this case, we meticulously reviewed trading records and developed the evidence necessary to connect these four promoters and their coordinated trading efforts.”
The SEC’s complaint filed in federal court in Tacoma, Wash., charges the following individuals:
Mikhail Galas, a stock promoter who lives in Vancouver, Wash.
Alexander Hawatmeh, a member of Worthmore Investments LLC, which owns a stock promotion website called stockhaven.com. He formerly lived in Vancouver and currently resides in Lincoln City, Oregon.
Christopher Mrowca, a stock promoter who operates Money Runners Group LLC, which has an affiliated stock promotion website called MoneyRunnersGroup.com. He lives in Bradenton, Fla.
Tovy Pustovit, who owns a stock promotion website called Explosive Alerts. He also lives in Vancouver.
In a parallel action, the U.S. Attorney’s Office for the Western District of Washington announced criminal charges against Galas, Hawatmeh, and Mrowca.
According to the SEC’s complaint, GrowLife Inc. was part of a broader online promotion of several marijuana-related stocks in early 2014. Mrowca specifically promoted GrowLife through his Money Runners Group website and predicted that the stock price would nearly double. Mrowca, Galas, and Hawatmeh meanwhile engaged in manipulative trading designed to increase the price and volume of GrowLife stock, and they later sold their shares for illicit profits.
Similarly, the SEC alleges that Hawatmeh, Galas, and Mrowca bought and sold approximately 41.7 million shares of Hemp Inc. in January and February 2014 while the stock was actively promoted on the Internet. For example, one Internet tout on February 6 claimed that Hemp could reach “a REAL Possible Gain of OVER 2900%.” During the promotion, Hawatmeh, Mrowca, and Galas engaged in manipulative wash trades and matched orders to manipulate Hemp’s common stock before selling their shares for illegal gains.
“This was a carefully planned operation by Galas, Hawatmeh, Mrowca, and Pustovit to distort the performance of specific penny stocks as they were simultaneously promoted through social media and the Internet. As the companies’ stock prices increased, these four promoters opportunistically dumped their shares for illicit gains,” said Amelia A. Cottrell, associate director in the SEC’s New York Regional Office.
The SEC’s complaint charges Galas, Hawatmeh, Mrowca and Pustovit with violating antifraud provisions of the federal securities laws. The SEC seeks temporary, preliminary, and permanent injunctions along with an emergency asset freeze, disgorgement, prejudgment interest, financial penalties, and orders barring the promoters from participating in a penny stock offering.
The SEC’s complaint names Nadia Hawatmeh as a relief defendant for the purposes of recovering ill-gotten gains in her brokerage account, which was used by the promoters to conduct some of their manipulative trades.
The SEC’s investigation has been conducted by Michael Paley, Eric M. Schmidt, Mona Akhtar, Joseph Darragh, and Tejal Shah. The case was supervised by Ms. Cottrell, and the litigation will be led by David Stoelting. The SEC appreciates the assistance of the U.S. Attorney’s Office for the Western District of Washington, the Federal Bureau of Investigation, and the Financial Industry Regulatory Authority
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