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Tag: microcap fraud

  • BULLETIN: SEC Suspends Trading In 379 Penny Stocks; Initiative Dubbed ‘Operation Shell-Expel’ Leads To Unprecedented Number Of Shutdowns

    BULLETIN: In an unprecedented move, the SEC today announced that it had suspended trading in 379 penny stocks, saying the companies were delinquent in filings and ripe for hijacking and scams involving reverse mergers and pump-and-dump schemes.

    “The trading suspension marks the most companies ever suspended in a single day by the agency as it ramps up its crackdown against fraud involving microcap shell companies that are dormant and delinquent in their public disclosures,” the agency said.

    The previous one-day record for trading suspensions was 35. That mark was set in 2005, but the SEC now says “enhanced intelligence technology” has enabled it to spot dormant companies more effectively and head off trouble at the pass.

    “Empty shell companies are to stock manipulators and pump-and-dump schemers what guns are to bank robbers — the tools by which they ply their illegal trade,” said Robert Khuzami, director of the SEC’s Division of Enforcement. “This massive trading suspension unmasks these empty shell companies and deprives unscrupulous scam artists of the opportunity to profit at the expense of unsuspecting retail investors.”

    Regulators such as the SEC and FTC and agencies such as the FBI long have fretted about the use of shell companies to pull off fraud schemes, dupe investors, customers and vendors and conceal crimes and civil offenses.

    “It’s critical to assess risks to investors in the capital markets and, through strategic planning, develop ways to neutralize them,” said Thomas Sporkin, director of the SEC’s Office of Market Intelligence. “We were able to conduct a detailed review of the microcap issuers quoted in the over-the-counter market and cull out these high-risk shell companies.”

    As part of an initiative dubbed “Operation Shell-Expel” undertaken by the SEC’s Microcap Fraud Working Group, the trading suspensions announced today affect “clearly dormant shell companies in 32 states and six foreign countries that were ripe for potential fraud,” the agency said.

    “The existence of empty shell companies can be a financial boon to stock manipulators who will pay as much as $750,000 to assume control of the company in order to pump and dump the stock for illegal proceeds to the detriment of investors,” the SEC said. “But with this trading suspension’s obligation to provide updated financial information, these shell companies have been rendered essentially worthless and useless to scam artists.”

    Here is the list of the 379 companies.

  • URGENT >> BULLETIN >> MOVING: FBI Undercover Operation Leads To Charges Against 13 Individuals In Alleged Penny-Stock Caper; SEC Halts Trading In 7 Companies

    URGENT >> BULLETIN >> MOVING: Thirteen individuals, including lawyers, corporate officers and a stock promoter, have been charged criminally in an FBI sting aimed at microcap fraud. The SEC has suspended trading in seven companies: 1st Global Financial Inc. (FGFB), based in Las Vegas; Augrid Global Holdings Corp. (AGHD), based in Houston; ComCam International Inc. (CMCJ), based in West Chester, Pa.; MicroHoldings US Inc. (MCHU), based in Vancouver, Wash; Outfront Companies (OTFT), based in Florida; Symbollon Corp./Symbollon Pharmaceuticals Inc. (SYMBA), based in Medfield, Mass; and ZipGlobal Holdings Inc. (ZIPG), based in Hingham, Mass.

    Investigators alleged the fraud involved illegal kickbacks and sham consulting agreements in schemes to hype penny stocks. The criminal activity occurred “in the midst of an undercover FBI operation,” the SEC said.

    Charged criminally, according to the SEC, were:

    • Kelly Black-White, 51, of Mesa, Ariz. Black-White operates Premier Funding Inc. and Premiere Services Inc.. He is charged with wire fraud.
    • James Prange, 60, of Greenbush, Wisc. He is affiliated with Northern Equity Inc., and is charged with wire fraud.
    • Michael Lee, 51, of Hingham, Mass. Lee is ZipGlobal’s CEO. He is charged with mail fraud and conspiracy to commit securities fraud.
    • Edward Henderson, 69, of Lincoln, R.I. He is charged with wire fraud.
    • Paul DesJourdy, 50, of Medfield, Mass. DesJourdy is the CEO of Symbollon Pharmaceuticals. He is charged with mail fraud and conspiracy to commit securities fraud.
    • James Wheeler, 51, of Camas, Wash. Wheeler is CEO of MicroHoldings Inc. He is charged with mail fraud and conspiracy to commit securities fraud.
    • Steve Berman, 49, of Hillsboro, Ohio. He is CEO of China Wi-Max Communications, and is charged with mail and wire fraud.
    • Richard Kranitz, 68, of Grafton, Wisc. He is a board member of China Wi-Max Communications, and is charged with mail and wire fraud.
    • JC Jordan, 60, of Cameron Park, Calif. Jordan is CEO of Vida Life International LTD. He is charged with mail and wire fraud.
    • Karen Person, 61, of Naperville, Ill. She is president of Small Business Company Inc., and is charged with mail and wire fraud.
    • Albert Reda, 65, of Tustin, Calif. He is treasurer of 1st Global Financial, and is charged with mail and wire fraud.
    • Steve Stuart, 48, of Monrovia, Md. Stuart is a major shareholder in ComCam International Inc., and is charged with mail and wire fraud.
    • Muhammad “MJ”  Shaheed, 44, of Houston. He is CEO of Augrid Global Holdings Corp., and is charged with mail and wire fraud.

    The office of U.S. Attorney Carmen Ortiz of the District of Massachusetts is handing the criminal cases, the SEC said.

    “Kickbacks and phony consulting agreements have no place in the financial strategies of any public company, and executives who engage in this kind of fraud are just selling out their own investors,” said David Bergers, director of the SEC’s Boston Regional Office.

    The undercover operation, according to the SEC, was under way for a year, and Desjourdy, Henderson, Lee and Wheeler also were charged civilly.