The Securities and Exchange Commission announced last week that 16 defendants have been charged with taking part in fraudulent penny stock schemes that spanned three continents.
In a news release, the SEC detailed the allegations against 15 individuals and one company based in the Bahamas, the British Virgin Islands, Bulgaria, Canada, the Cayman Islands, Monaco, Spain, Turkey, and the United Kingdom.
The multi-year schemes, labeled by the commission as ‘pump and dump’ plots, generated over $194 million in illicit proceeds. The SEC alleged that several defendants in a variety of roles accumulated shares in penny stocks through difficult to unveil offshore nominee companies, with some of them using encrypted text and phone applications to avoid detection. Once they had gained a significant majority of the shares, secretly funded promotional campaigns were used to promote the stocks to unsuspecting investors. When those campaigns led to higher prices and stronger demand for the stocks, some of the defendants sold them through trading platforms in Asia, Europe and the Caribbean for significant profit, according to the SEC’s complaints.
The commission said the alleged plots represented some of the most complex microcap stock fraud schemes it had ever charged. “By locating their operations overseas, using encrypted messaging and operating through a convoluted network of offshore accounts, the defendants hoped to avoid detection of the massive frauds we allege they perpetrated on US markets and investors,” said Gurbir S. Grewal, Director of the SEC’s Division of Enforcement. “However, investigative teams from three SEC offices doggedly kept on their trail, working across borders, and ended this alleged global scheme.”
The SEC’s complaints were filed in the United States District Court for the Southern District of New York and are related to parallel criminal actions announced by the United States Attorney’s Office.
The defendants are charged with violating the antifraud and registration provisions of the federal securities laws. The SEC is seeking permanent injunctions, disgorgement of allegedly ill-gotten gains plus interest, and civil penalties against all the defendants.
The attorneys at Lewitas Hyman have decades of experience dealing with securities fraud cases and have a deep understanding of how capital markets and financial service firms are intended to work to protect investors. If you think your financial professional or firm engaged in misconduct that caused you investment losses, contact us at (312) 291-4600 or through our online contact form for a no-cost evaluation of your matter.