From the same penny stock promoters that brought you the BISU scam:
"S.E.C. Charges 2 Penny Stock Promoters With Scalping
By MICHAEL J. DE LA MERCED
The Securities and Exchange Commission on Tuesday waded into the murky world of penny stock speculators, accusing two Web-savvy advisers of fraud for pumping up stocks that they were also selling — for at least $2.4 million in profit.
The agency charged a Canadian couple, Carol McKeown and Daniel F. Ryan, with four counts of fraud for using their Penny Stock Chaser Web site and Facebook and Twitter feeds to promote a half-dozen companies’ stocks. What the two did not disclose to their followers, according to the complaint, filed in federal court in southern Florida, is that they were regularly selling shares in the companies they were hawking, a practice known as “scalping.”
Penny Stock Chaser cropped up last year when shares in General Motors mysteriously kept rising despite the car maker’s filing for bankruptcy and splitting itself into two companies, one of which would remain in Chapter 11.
A press release from Penny Stock Chaser argued that shares in G.M., which took the ticker “GMGMQ” after filing for bankruptcy in June 2009, were expected to go higher. The Web site did note that the existing securities of G.M. belonged to the cast-off company, renamed the Motors Liquidation Company and now carrying the ticker “MTLQQ.” Still, the trading in old G.M. grew so much, bewildered regulators were forced to clarify that the stock belonged to a liquidating corporation. (G.M. was not one of the stocks cited in the S.E.C.’s complaint.)
The S.E.C. and its counterpart in Montreal, the Autorité des marchés financiers, have sought to freeze the couple’s assets and a disgorgement of ill-gotten gains.
According to the S.E.C.’s complaint, Ms. McKeown and Mr. Ryan began Penny Stock Chaser in the spring of 2009, promoting themselves as a husband-and-wife team that led a group of skilled stock pickers. Over the past year, their firm touted the stocks of at least 65 American companies. (The S.E.C. is pursuing the case in Florida because many of the couple’s trades were made in Boca Raton, although they were based in Montreal.)
No strangers to modern investing, Ms. McKeown and Mr. Ryan promoted their picks via an array of services, including the Web site, Facebook, Twitter and text messages. (The Web site appears to be down as of Tuesday evening. The Twitter feed, which had 62,999 followers, is now protected.)
The returns that Penny Stock Chaser promised are pretty dramatic: it said in its Twitter description that its 2009 average was up 300 percent.
While they used Penny Stock Chaser to tout the securities of various companies, Ms. McKeown and Mr. Ryan used two other entities, Meadow Vista Financial and Downshire Capital, to sell those very same stocks. Downshire was described by the two to be an investment bank in Montreal, where the two were based, while Meadow Vista was as an investment bank in Cheyenne, Wyo.
According to the S.E.C., the crux of the purported scheme lay in issuers’ affiliates or third parties providing Downshire and Meadow Vista with shares in particular companies that would be touted, or the couple would buy shares of stocks they would then tout. The effect was that as the penny stocks went up because of investor demand, the two would sell off their holdings and profit handsomely.
The Web site’s only disclosure statement was that Penny Stock Chaser “may be selling shares of stock at the same time the profile is being disseminated to potential investors; this should be viewed as a definite conflict of interest and as such, the reader should take this into consideration.” The S.E.C. contends in its complaint that such a statement was inadequate disclosure for the regular and “massive” quantities of stock the couple sold.
Eric I. Bustillo, the director of the S.E.C.’s Miami office, said in a statement, “McKeown and Ryan used all the modern methods to communicate with investors including the PennyStockChaser Web site, e-mail, text messages, Facebook and Twitter, yet failed to adequately communicate that their rosy predictions for touted stocks were accompanied by their sales of those very same stocks.”
Representatives for Ms. McKeown and Mr. Ryan could not be reached, and calls to Penny Stock Chaser were not returned on Tuesday evening.
The complaint outlines six specific companies that Penny Chaser touted fraudulently:
Converge Global, a Utah-based real estate company, which the two touted at least four times, gaining $602,000 in net proceeds;
Biocentric Energy Holdings, a Florida-based green-tech company, whose stock movements netted the two $569,000 in net proceeds;
Bluewave Group, a Nevada-based multimedia company, whose stock garnered them $184,000 in net proceeds;
Avro Energy, a Nevada-based oil company, which produced $16,000 in net proceeds;
Atlantic Wind & Solar, a West Virgina-based solar energy company, which garnered $780,600 in net proceeds;
MSE-Enviro-Tech, a Delaware-based fire suppressant maker, whose stock gained the two $240,000 in net proceeds.
The proclamations of Penny Stock Chaser — along the lines of “You cannot own too much of a good thing … THE ONLY ADVICE WE HAVE IS TO BUY BEFORE THE CROWDS” [sic] — appear to have tremendously swelled trading in the stocks the company touted.
Trading volume in Atlantic jumped from 13,812 shares in July 2009 to more than 1 million shares on Oct. 22, 2009, the month Penny Stock Chaser began its promotion.
The stock price spiked too, rising from 70 cents a share on July 22 to $4.84 a share on Oct. 22, before falling to $2.70 days later.
Meadow Vista had received about 430,000 shares of Atlantic between Sept. 1 and Jan. 27, and sold about 84 percent of its holdings for between $1.49 and $3.37, according to the complaint.
– Michael J. de la Merced"
