Stock Scam Alert

South Florida scams busted: Ponzis, pump ‘n’ dumps, Forex

South Florida Business Journal by Paul Brinkmann, Reporter

Date: Monday, June 4, 2012, 5:11pm EDT


A concerted attack on investment fraud in South Florida over the past three years has netted 85 people busted and more than $1.5 billion in restitution ordered.

Federal and state authorities announced the results Monday, along with a list of 12 new cases that included Clean Coal Technologies.

Clean Coal’s president, Douglas Hague, 65, of Boca Raton, was charged Monday along with 15 other new defendants.

The charges allege that Hague paid kickbacks to a third party with the purpose of pumping up the stock price for Clean Coal Technologies (OTC: CCTC). The company purportedly converted low-grade coal to high-grade clean-burning coal. But the charges allege that Hague paid kickbacks to the manager of a pension fund to buy stock at inflated prices.

The federal district for South Florida ranks second in the nation in securities and investment fraud investigations and prosecutions.

According to the news release from the U.S. Attorney’s office, other new cases included:

Cleland Ayison, 32, of Tampa, arrested Monday on charges of possessing a fraudulent $500 million Federal Reserve Note.

Michael Cimino and Joseph Repko: Cimino, 59, of Philadelphia, Penn., the director and chairman of the board for Sure Trace Security Corporation (SSTY), and Repko, 63, of Hobe Sound, SSTY’s chief financial officer and president, were arrested Monday on charges of conspiring to commit mail fraud by paying kickbacks to a pension fund fiduciary for buying stock at inflated prices. SSTY, a Utah corporation, was purportedly involved in the anti-counterfeiting technology business.

Ryan Coblin, 41, of Boca Raton, president of Delivery Technology Solutions, a delivery company. Coblin was charged in September and pleaded guilty March 8 to engaging in a scheme to pay kickbacks to a hedge fund fiduciary in a stock scheme. Sentencing is scheduled for July 13.

Scott Haire, 42, of Coral Springs, was president of Wound Management Technologies, Inc. (WNDM), a Texas corporation that purportedly developed advanced wound care products. Haire was charged with engaging in a scheme to manipulate the publicly quoted share price and trading volume of WNDM common stock. Haire is expected to surrender on June 6.

According to the news release, authorities arrested several other people from other states who held meetings in South Florida to further their stock schemes.

Ponzi Schemes

Juan Carlos Rodriguez, 49, of Miami, indicted March 6 for alleged wire fraud in the execution of a Ponzi scheme. According to the indictment, Rodriguez was the sole officer and director of MDN Financial Group, a Miami company that solicited approximately $5.2 million from investors with promises that the company would invest in stocks, bonds, and precious metals. Rodriguez would recruit colleagues and friends to invest in MDN Financial, promising them 20 to 50 percent returns. He used more than $1 million of the money to pay for personal expenses like credit card bills.

George Elia, 68, formerly of Fort Lauderdale, scheduled to be arraigned June 6 on charges of operating a Ponzi scheme in which he recruited investors by making false claims about the potential returns on investments. Elia was the president of Fort Lauderdale-based International Consultants & Investment Group, LC. The Business Journal previously wrote about the alleged fraud.

Aner Menendez, arrested Monday on charges of mail fraud and wire fraud. As the sole member of Key Biscayne-based De Forcade LLC, he recruited investors claiming he was a skilled foreign currencies trader (foreign exchange or For-ex). He exploited social relationships to convince his victims to invest savings with him, but spent the money on himself and friends.

The SEC also said it filed nine separate civil injunctive actions against 12 individuals and eight microcap companies, charging them with violations of the antifraud provisions of the federal securities laws and seeking, among other relief, permanent injunctions, disgorgement and financial penalties.

Led by U.S. Attorney Wifredo Ferrer, the initiative includes the U.S. Securities and Exchange Commission and the state’s Office of Financial Regulation. Other cooperating agencies include the IRS, FDIC and FTC.

Ferrer said in a news release, “Too often, we hear from victims who have lost their entire lives’ savings or their retirement nest egg to one of these unscrupulous schemers. Today, we hope to educate the public about the need to be alert and to verify before trusting and investing. If something sounds too good to be true, it usually isn’t.”

Penny Stock Scams (South Florida Business Journal)

SEC targets 379 shell companies in fraud-fighting initiative


South Florida Business Journal
Date: Monday, May 14, 2012, 2:44pm EDT


The Securities and Exchange Commission on Monday suspended trading in the securities of 379 dormant companies before they could be hijacked by fraudsters and used to harm investors through reverse mergers or pump-and-dump schemes, the agency said in a press release.

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.

South Florida has traditionally been one of the nation's hotbeds when it comes to microcap shell companies, which are often touted via investment newsletters and telephone sales operations. The SEC has a link to a list of the companies whose trading has been suspended, but the list did not have a breakdown of where the companies are located.

Earlier this month, the SEC suspended the trading of two companies based in Fort Lauderdale and Miami, saying there was an attempt to manipulated the market. In April, FBI Director Robert Mueller in a Miami speech said corporate and securities fraud were a big problem for South Florida's business community.

In a pump-and-dump, perpetrators will tout a thinly-traded microcap stock through false and misleading statements about the company, the SEC said. After purchasing shares for a low price and pumping the stock price higher by creating the appearance of market activity, they dump the stock to make huge profits by selling it into the market at the higher price.

While the price gains are often less than a dollar per share, the schemes can generate millions in revenue through dramatic percentage increases in share prices.

"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."

Stock manipulators will pay as much as $750,000 to assume control of a shell 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 for scam artists.

An initiative tabbed Operation Shell-Expel by the SEC's Microcap Fraud Working Group utilized various agency resources including the enhanced intelligence technology of the Enforcement Division's Office of Market Intelligence to scrutinize microcap stocks in the markets nationwide and identify clearly dormant shell companies in 32 states and six foreign countries that were ripe for potential fraud, the SEC said.

The SEC's previously largest trading suspension was an order in September 2005 that involved 39 companies. The federal securities laws allow the SEC to suspend trading in any stock for up to 10 business days. Subject to certain exceptions and exemptions, once a company is suspended from trading, it cannot be quoted again until it provides updated information including accurate financial statements.

Beware those low-priced stocks (South Florida Business Journal)

Task force continues penny stock crackdown

Florida Business Journal - by Kevin Gale
Date: Thursday, June 30, 2011, 4:33pm EDT


Eric Bustillo, the SEC's regional director in Miami, said agencies are combining their limited resources to fight fraud.
Government agencies in South Florida are continuing a crackdown against penny stock promoters with undercover work that resulted in a flurry of conspiracy charges and an SEC action on Thursday.

Those charged live in Coconut Creek, California, Texas and Nevada – an indication of the broad geographic reach of the multi-agency effort.

The investigation is targeting what Eric Bustillo, director of the SEC’s Miami regional office, calls the "securities fraud underworld. Unfortunately, it has many of the players located down here."

In a telephone interview, Bustillo said investigators follow the trail of evidence as it unfolds.

It's not unusual for promoters and consultants to reach out to others for help raising money or fraudulently manipulating the price of stock, he said.

Historically, penny stock cases often involve promoters and telephone sales boiler rooms that make inflated claims. Cases are getting new twists these days through the use of websites and social media.

Most of the schemes listed Thursday involved kickbacks to a purportedly corrupt pension fund trustee in exchange for having the fund buy stock in microcap companies, the SEC said in a news release.

Another scheme involved a bribe that was to be paid to a purportedly corrupt broker who agreed to buy microcap shares on behalf of investors with discretionary accounts, the SEC said.

A final scheme involved a stock promoter who created a website to tout a penny stock company through a volley of e-mail blasts, and who posted phony testimonials from fake investors, the SEC said.

What the insiders and promoters did not know was that the people who were counterparties to the illegal transactions were actually undercover FBI agents or confidential sources participating in an undercover operation, the SEC said.

The latest charges follow a series of cases, filed in October and December 2010, in which the SEC sued more than a dozen companies and penny stock promoters with similar stock manipulation schemes.

On Thursday, Brian Gibson, 63, of Coconut Creek, was charged with one count of conspiracy to commit securities fraud in connection with a scheme to defraud the investing public by engaging in deceptive and manipulative trading practices in connection with Xtreme Motorsports International stock, according to a news release from Wifredo A. Ferrer, U.S. attorney for the Southern District of Florida, and John V. Gillies, special agent in charge for the FBI in Miami.

Gibson was a marketing consultant for Xtreme Motorsports International who conspired with others to create a promotional website that encouraged investor interest in the company, the U.S. attorney’s press release said.

The website contained false and fraudulent statements, including false testimonials, the U.S. attorney said. Gibson faces up to five years in prison, three years of supervised release and substantial monetary fines, as do the others charged, according to the U.S. attorney:

Donald W. Klein, 40, of Frisco, Texas, who faces a count of conspiracy to commit securities fraud by engaging in deceptive and manipulative trading practices in connection with KCM Holdings, of which he was president and CEO. Klein is charged with engaging in a “pay-to-play” scheme to cause a stockbroker to purchase company stock in return for a kickback payment.
Douglas Newton, 66, of Rancho Mirage, Calif., who was charged with one count of conspiracy to commit securities fraud in connection with a scheme to defraud the investing public by engaging in deceptive and manipulative trading practices in connection with Real American Brands, of which he was president. Newton is charged with engaging in a “pay-to-play” scheme to cause a pension fund fiduciary to purchase shares in return for a kickback.
Charles Fuentes, 66, of Dana Point, Calif., and Thomas Schroepfer, 54, of Las Vegas, who were charged with one count of conspiracy to commit securities fraud in connection with a scheme to defraud the investing public by engaging in deceptive and manipulative trading practices in connection with Smoke Free Innotec Inc. stock. Fuentes was a consultant and Schroepfer was the president. Fuentes and Schroepfer are charged with engaging in a “pay-to-play” scheme to cause a pension fund fiduciary to purchase shares in return for a kickback.
Ferrer said the case show the risks associated with thinly traded microcap stocks.

"The defendants charged today abused their knowledge of the capital markets hoping to misappropriate money held in pension fund and brokerage accounts to enrich themselves and their co-conspirators,” he said in a news release.

“Investors deserve better than secret investment strategies based on kickbacks and bribes,” said Robert Khuzami, director of the SEC’s Division of Enforcement, in a news release. “As our charges make clear, these CEOs got more than they bargained for, but exactly what they deserved, for making illicit payments to manipulate microcap stocks.”

Bustillo said the federal agencies are combining their limited resources to bring the microcap cases, and more are likely down the road.

kgale@bizjournals.com | (954) 949-7520 On Twitter: @kevingale

Beware Penny Stocks (WSJ)

JUNE 7, 2011, 10:15 A.M. ET.

SEC Suspends 17 OTC-Traded Stocks, Questions Disclosures
.


DOW JONES NEWSWIRES

The Securities and Exchange Commission suspended 17 microcap stocks that trade on the over-the-counter market, citing questions about the adequacy and accuracy of publicly disclosed information.

"They may be called penny stocks, but victims of microcap fraud can suffer devastating losses," said Robert Khuzami, director of the SEC's division of enforcement. "The SEC's new Microcap Fraud Working Group is targeting the insiders and promoters, as well as the transfer agents, attorneys, auditors, broker-dealers, and other gatekeepers who flourish in the shadows of this less-than-transparent market."

The 17 companies suspended are American Pacific Rim Commerce Group (APRM), Anywhere MD Inc. (ANWM), Calypso Wireless Inc. (CLYW), Cascadia Investments Inc. (CDIV), CytoGenix Inc. (CYGX), Emerging Healthcare Solutions Inc. (EHSO), Evolution Solar Corp. (EVSO), Global Resource Corp. (GBRC), Go Solar USA Inc. (GSLO), Kore Nutrition Inc. (KORE), Laidlaw Energy Group Inc. (LLEG), Mind Technologies Inc. (METK), Montvale Technologies Inc. (IVVI), MSGI Security Solutions Inc. (MSGI), Prime Star Group Inc. (PSGI), Solar Park Initiatives Inc. (SOPV) and U.S. Oil & Gas Corp. (USOG).

The trading suspensions result from a joint effort among several SEC regional offices, its Office of Market Intelligence and the new Microcap Fraud Working Group, which looks to detect fraud involving microcap securities.

The SEC said stock-touting websites, twitter users and often anonymous individuals posting to message boards have influenced the investment decisions of the public, which often doesn't have adequate information about the securities.

As an example, the SEC said Calypso Wireless hasn't filed periodic reports since February 2008. In spite of this, the shares rose to an intra-day high of 17 cents on Sept. 24, the same day a stock-promoting website allegedly encouraged investors to continue buying the stock. The stock traded at 4 cents on Sept. 21.

-By Melodie Warner, Dow Jones Newswires; 212-416-2283; melodie.warner@dowjones.com

Beware of Hot Tips , Penny Stocks (N Y Times)

May 8, 2009
Market Place
The Internet’s Role in Gaming the Markets
By FLOYD NORRIS
HERE’S an investment opportunity you might be able to pass up.

The company has no operations, and no prospects of any. Its previous operations all failed, and the reports the company files with the Securities and Exchange Commission show that its only source of cash is issuing stock.

But a few weeks ago, this stock shot upward on huge volume, providing what may have been huge profits for the people who were being allowed to buy stock from the company at a deep discount to market price. Perhaps not so coincidentally, some Internet message boards buzzed with activity at the same time, promoting the stock as one that was sure to keep rising.

The name of the company is MotivNation, but that is of little importance. There are many companies like it.

A look at MotivNation’s trading activity this year provides a window on a netherworld of the American stock market. It also illustrates the paradox of the intersection of the penny stock market — a traditional area of stock promotion and “pump and dump” schemes — and the Internet.

On the one hand, the Internet has made it far easier for any investor who wants to do so to quickly find S.E.C. filings by any company. Twenty years ago, getting a copy of a corporate filing was either slow (ask the company to send you one) or expensive (buy a filing from a company that could get it from the S.E.C.). Now anyone with Internet access can download corporate reports within seconds after they are filed.

But the Internet has also made stock manipulation much easier. In the old days, a person — perhaps a broker for a penny stock firm — would have to contact an investor and talk him or her into buying the stock. That was expensive. Now, mass e-mail messages can be sent out — it appears that happened with MotivNation — and anonymous posters on bulletin boards can promote the stock at very low cost. One enthusiast signed his posts, “Cantgetmyname.”
Anyone who bothers to read the annual report filed by MotivNation can learn just how little fundamental value the company has, and how the company prints shares by the millions while it has no other business.

To be sure, the filing of that annual report was delayed past the due date, and by the time it arrived the stock promotion appeared to have settled down. In the weeks before the filing, the price of 100 shares of the stock leaped to a high of 37 cents, from 2 cents, and hundreds of millions of shares were traded. Now it is back to about 12 cents, still an amazing price given the company’s lack of a business.

Where did those shares come from? Many millions were newly printed by the company, sold to hedge funds at deep discounts to market value and almost immediately sold on to speculators. Others appear to have been sold by speculators who did not own any shares, and did not borrow any, but were placing bets that the stock price would decline. They were engaging in what is called naked short-selling, which is illegal if it is intended to manipulate the stock.

How many shares were created by each method? From the annual report, we know that MotivNation issued 28 million shares in the first quarter, but there is no way to know how many were issued after the end of the quarter, while volume was still high. As of the end of the quarter, the company had 134 million shares outstanding, up from 30 million last June, just before the company’s only operating subsidiary went into bankruptcy and ceased operations.

Under S.E.C. rules, stock markets each day release the name of any company where there have been failures to deliver at least one-half of 1 percent of the outstanding shares — a figure that for this company would be fewer than 700,000 shares. MotivNation went on the OTC Bulletin Board list a few days before the stock peaked in late March, and has stayed there since. From publicly available information, there is no way to know how many failures to deliver there have been.

A call to the phone number for MotivNation, in Irvine, Calif., was picked up by an answering machine that did not indicate whose number it was. The call was not returned.

Yoel Goldfeder, a lawyer for Corey Ribotsky, whose hedge funds were the buyers and distributors of the stock issued by the company, said his client had not promoted the stock he was buying and selling to the public. “We definitely would not have been involved in marketing anything, especially, as in this case, if there was nothing much to market,” he said.

Mr. Ribotsky’s funds have made similar investments in numerous other companies, and claim to be among the most profitable hedge funds in recent years. In this case, they have the right to buy MotivNation stock at any time they want — paying half of the lowest price the stock has traded for in any three of the most recent 20 days. There is a limit as to how many shares the funds can own, but that limit is irrelevant since they can purchase more shares as soon as they sell the ones already bought.

Who’s the villain here? Is it Mr. Ribotsky’s funds? They appear to have followed the rules. Is it the company? It has made the required disclosures, albeit sometimes on a tardy basis. Is it people who promoted the stock? Perhaps, but it is not easy to know exactly who they are. Is it the naked shorts? They have violated S.E.C. rules, but at the same time they have probably saved investors money by keeping the stock from rising to heights even more absurd than the ones it reached.

If the villain is not easy to spot, the victims are. They are the people who will end up owning worthless stock. Don’t be surprised if some of them conclude that they were victimized not by the people who promoted a company with nothing to recommend it, but by the naked short-sellers who figured out what was happening and, in effect, siphoned off some profits that would have gone to the promoters.