In Ovations Holdings Inc. (INOH)

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MARKET MANIPULATION

U.S. Securities and Exchange Commission

Shell Companies (Microcaps)
• Insiders purchase dormant corporation with previously registered freely tradable stock (“shell company”)
• Merge that dormant corporation into privately-held company with some genuine or purported line of business
• Find a cooperative transfer agent
• Locate a broker-dealer who is willing to make a market in
the newly merged company
• Trading begins in the shares of the newly-created entity

Gain control of a shell company
• Find a closely-held shell company (usually a defunct company).
• Orchestrate a reverse merger of a privately-owned company at a grossly over-inflated price which give the stock manipulator a majority of the company’s shares.
• Rename the company.
• Buys out any remaining shareholders and appoints new
officers and directors.
• Reverse stock splits
• RESULT – Stock manipulator has gained control of a public company without having to go through more stringent IPO process.

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Bogus “Exempted” Securities
• Fraudsters need to use some mechanism for issuing “freely tradable” securities to themselves
• Will often issue stock pursuant to an exemption to the SEC registration statements
• In reality, these exemptions are being abused and do not apply
• Examples in the US:
• Rule 504 offerings – allow sales of limited dollar amount that
purportedly comply with state requirements
• S-8 offerings – stock issued to advisers and consultants as purported compensation

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Category 1: Pump and Dumps
• Insiders or promoters obtain ownership or control of a significant block of stock of selected issuer
• Can use their own accounts or nominees
• Then they start hyping the stock to the public to generate artificial interest in stock and cause price to rise
• Often use internet, spam email and faxes

https://www.sec.gov/files/Market%20Manipulations%20and%20Case%20Studies.pdf