DD Support Board and Research Team

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Trading in PHOT 11

90. From January 9 to January 14, 2014, there was an Internet promotion of PHOT as part of a broader promotion of several marijuana-related stocks.

91. During that promotion, Mrowca and Galas traded approximately 6.4 million shares of PHOT common stock, and during and leading up to the promotion engaged in manipulative trading designed to increase the price and volume of PHOT common stock.

92. From January 2, 2014 through January 14, 2014, Mrowca engaged in wash trades of PHOT common stock and also engaged in matched orders of PHOT common stock with Galas.

93. Mrowca used “limit orders” to execute his wash trades of PHOT common stock.

94. A “limit order” is an order to a broker to buy or sell a security that sets a particular price, the “limit price,” at which the broker is authorized to execute the transaction.

95. For each wash trade of PHOT common stock, Mrowca entered a limit order to sell that had a lower limit price than the corresponding limit order to buy. The purpose of Mrowca’s sell low/buy high strategy was to increase the stock price.

96. Mrowca entered matched orders for PHOT common stock knowing that matching orders had been placed or would be placed by Galas.

97. Galas entered matched orders for PHOT common stock knowing that matching orders had been placed or would be placed by Mrowca.

98. Mrowca entered matched orders and wash trades for PHOT common stock with the intention of creating a false or misleading appearance of active trading in PHOT common stock or a false and misleading appearance with respect to the market for PHOT common stock.

99. Galas entered matched orders for PHOT common stock with the intention of creating a false or misleading appearance of active trading in PHOT common stock or a false and misleading appearance with respect to the market for PHOT common stock.

100. From January 2, 2014 to January 9, 2014, while the manipulative trading was taking place, the price of PHOT increased 196% from $.1575 per share to a high of $.467 per share.

101. By January 14, 2014, Mrowca and Galas had liquidated their PHOT holdings, generating gross profits of approximately $54,700 for Mrowca and $3,200 for Galas.

102. From March 6, 2014 through March 18, 2014, Mrowca promoted PHOT through Money Runners Group, LLC and its related website, MoneyRunnersGroup.com. The promotion touted the marijuana industry, and predicted that PHOT’s stock price would nearly double.

103. During that promotion, A. Hawatmeh, Mrowca and Galas engaged in manipulative trading designed to increase the price and volume of PHOT common stock and they then sold their stock.

104. On March 6, 2014, shares of PHOT opened at $.3865 per share. During the promotion, from March 6, 2014 to March 18, 2014, PHOT’s daily average market volume increased to over 60 million shares per day and PHOT traded as high as $.7777 per share. This was a 101% price increase from March 6, 2014.

105. From March 6 to March 18, 2014, Mrowca, Galas, and A. Hawatmeh collectively traded approximately 17 million shares of PHOT.

106. During the period March 6, 2014 through March 17, 2014, Mrowca engaged in wash trades, and in matched orders with Galas and A. Hawatmeh.

107. Mrowca entered matched orders for PHOT knowing that matching orders had been placed or would be placed by Galas or A. Hawatmeh.

108. Galas entered matched orders for PHOT knowing that matching orders had been placed or would be placed by Mrowca.

109. A. Hawatmeh entered matched orders for PHOT knowing that matching orders had been placed or would be placed by Mrowca.

110. Mrowca entered the matched orders and wash trades for PHOT with the intention of creating a false or misleading appearance of active trading in PHOT common stock or a false and misleading appearance with respect to the market for PHOT common stock.

111. Galas entered the matched orders for PHOT with the intention of creating a false or misleading appearance of active trading in PHOT common stock or a false and misleading appearance with respect to the market for PHOT common stock.

112. A. Hawatmeh entered the matched order for PHOT with the intention of creating a false or misleading appearance of active trading in PHOT common stock or a false and misleading appearance with respect to the market for PHOT common stock.


113. A. Hawatmeh’s, Mrowca’s and Galas’s matched orders and wash trades affected the market price and volume of PHOT stock.

114. By March 18, 2014, Mrowca, Galas and A. Hawatmeh had sold the positions in PHOT stock each of them had built up since January 14, 2014.

115. From December 16, 2014 through March 2014, trading in PHOT common stock in Mrowca’s accounts generated gross profits of approximately $111,000; trading in PHOT common stock in Galas’ account generated gross profits of approximately $6,000; and trading in PHOT common stock in A. Hawatmeh’s account generated a gross loss of approximately $17,000.

116. On April 10, 2014, the Commission suspended trading in PHOT securities.


Extract -
08/05/2014 3 AMENDED COMPLAINT against defendant(s) All Defendants with JURY DEMAND, filed by Securities and Exchange Commission.(Stoelting, David) (Entered: 08/05/2014)
Doc 3 PDF file
http://www.sec.gov/litigation/complaints/2014/comp-pr2014-159.pdf