SEC Charges Eleven in Stock Manipulation Ring

[scion]

FACTS

GH3 InternationaL Inc.

29. GH3 is a Nevada company that purports to market anti-aging products. The GH3 pump-and-dump scheme occurred in October-December 2006 and generated fraudulent proceeds of $747,609. In late 2006, Brown, Dynkowski, and Canceli attended a meeting at the offices ofAIS in California with a representative of GH3. Another representative of GH3 participated in the meeting by telephone. Brown, Dynkowski, Canceli, and the two representatives from GH3 planned the pump-and-dump scheme at this meeting. They agreed that GH3 would issue company stock in 52 million share increments to Canceli for $0.001 per share, with payment due after Dynkowski succeeded in inflating the market price ofGH3 stock and selling those shares to unsuspecting investors. Mangiapane, who managed the AIS office, agreed to allow the meeting to be held at AIS's office in exchange for a portion of the proceeds from the pump-and- dump scheme.

30. Dynkowski inflated the market price ofGH3 stock through manipulative trading timed to coincide with misleading and touting press releases. Brown helped to coordinate the timing ofthis manipulative trading with the press releases, by serving as a liaison between Dynkowski and Canceli, who was in contact with representatives of GH3. When the scheme began, GH3 traded for merely four-hundredths of a penny ($0.0004), but the efforts of Dynkowski, Brown and others in the scheme eventually propelled the stock's price to a high of 1.8 cents per share - a gain ofmore than 4,000 percent.

31. Representatives ofGH3 laid the groundwork for the scheme. On October 30, 2006, they arranged for GH3 to execute a 1 for 20 reverse stock split that reduced the company's outstanding shares by 95%. This move was important because, after the split, the millions of shares issued by the company for Dynkowski to sell later in the scheme represented the vast majority of the company's outstanding stock, and any sales by existing shareholders would have less impact on the stock's price.

32. Between December 4 and 12,2006, GH3 transferred 312 million company shares to accounts in Canceli's name at Spartan Securities Group and Bishop Rosen & Co. A representative ofGH3 instructed the transfer agent to issue the shares without restrictive legend to an individual known to GH3 representatives from previous dealings (hereinafter ''the GH3 Nominee"). GH3 representatives asked the GH3 Nominee to act as a conduit and he agreed to do so.

33. Under this arrangement, GH3 purportedly sold the shares to an entity owned by the GH3 Nominee on six different occasions, and that company then re-sold the shares to Canceli. These offers and sales of securities were unregistered and not subject to a valid exemption from registration. They were sham transactions intended to evade registration requirements. Everyone involved in these transactions intended for the shares to be sold into the public market as soon as possible (as they in fact were).

34. Starting on December 4, and continuing through December 13, 2006, Dynkowski and others, such as Brown, engaged in manipulative trading ofGH3 stock, including using wash sales and matched orders to inflate its price.

35. Dynkowski engaged in wash trading between his own accounts and multiple nominee accounts held in the names ofhis father, Tetrix Financial (a company Dynkowski owns), and Canceli. Dynkowski also traded matched orders with Brown. These wash sales and matched orders involved hundreds of millions of shares of GH3.

36. This manipulative trading artificially inflated the price ofGH3's stock and made it appear to investors that GH3's stock was much more liquid than it really was. As unsuspecting buyers were attracted to GH3 in increasing numbers, the stock's volume and ultimately its price continued to increase.

37. Dynkowski timed his manipulative trading to coincide with touting press releases from the compan . At the initial meeting when the GH3 pump-and-dump was planned, representatives ofGH3 had promised to "provide news" as part of the scheme. Through Canceli, GH3 representatives coordinated company press releases with Dynkowski and Brown.

38. On December 7,2006, GH3 issued a press release stating that its 2005 revenues exceeded $2.1 million. The next day, December 8, GH3 issued a second press release stating that its revenues for 2006 exceeded $3 million. Dynkowski timed his manipulative trading with these press releases, and the volume and price of GH3 stock soared. On December 7, for example, the volume oftrading in GH3's stock increased over 600% from the prior day, and the price ofthe stock jumped more than 150% (from 0.7 cents to 1.8 cents).

39. Dynkowski began dumping the shares received from the issuer on December 7 and continued selling for the next several days. Although Dynkowski was not listed as an authorized trader on Canceli's accounts, he placed sell orders directly with Canceli's brokers at Bishop Rosen and Spartan Securities. Between December 7 and December 13,2006, Dynkowski and Canceli sold all 312 million shares they received from the issuer, generating proceeds of $747,609.

40. In order to keep the price ofthe stock up while selling these shares, Dynkowski continued to engage in manipulative trading, and the company issued additional press releases. Indeed, at one point, Dynkowski instructed Brown to have the company issue a press release stating that the company had ordered a non-objecting beneficial owners (''NOBO'') list from its transfer agent. The purpose ofthe ''NOBO press release" was to mislead investors into believing that the massive selling of GH3 stock (for which Dynkowski was responsible) was attributable to short sellers. GH3 issued the misleading NOBO press release on December 8, 2006, just as Dynkowski was dumping the shares from Canceli's accounts.

41. Brown, Canceli, Dynkowski, Mangiapane, Riviello, the GH3 Nominee and GH3 (or its representatives) divided the illicit proceeds from the scheme. Brown, Mangiapane, and Riviello laundered a substantial portion of the money in order to pay Dynkowski.

42. After Dynkowski finished selling the 312 million shares that Canceli obtained from GH3, representatives ofthe company continued making additional unregistered offers and sales ofGH3 stock through the GH3 Nominee that were not subject to a valid exemption from registration. GH3 representatives authorized the transfer of an additional 988 million shares to the GH3 Nominee, and he sold the bulk of these securities for a few thousandths of a penny per share, realizing approximately an additional $272,000 in proceeds. The GH3 Nominee gave approximately $130,000 of this money to the company and kept the rest for himself.

-----
SEC Complaint
http://sec.gov/litigation/complaints/2009/comp21053.pdf