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PennyStockChaser Fails to Outrun the SEC

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Stock   Wednesday, 07/07/10 12:03:42 PM
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PennyStockChaser Fails to Outrun the SEC
by Melissa Davis - 6/30/2010 8:21:40 AM

PennyStockChaser, a promotional website that caught the attention of TheStreetSweeper seven months ago with its breathless recommendations of dubious microcap companies, cannot run away from government authorities any more.

The U.S. Securities and Exchange Commission cracked down on PennyStockChaser this week, filing charges against the website, its two owners – Carol McKeown and Dan Ryan – and two investment firms under their control. In its formal complaint, the SEC accused the defendants of “clandestinely selling millions of shares” in the same stocks that it was urging investors to buy. All told, the SEC estimates, the defendants pocketed at least $2.4 million from their so-called stock-scalping scheme.

“McKeown and Ryan used all the modern methods to communicate with investors, including the PennyStockChaser website, email, text messages, Facebook and Twitter,” Eric Bustillo, director of the SEC’s office in Miami, stated when announcing the charges on Tuesday. “Yet (they) failed to adequately communicate that their rosy predictions for touted stocks were accompanied by their sales of those very same stocks.”

According to the SEC, PennyStockChaser promoted more than 65 different penny stocks during 2009 alone. When TheStreetSweeper originally examined PennyStockChaser back in November, it calculated that the website had already received almost 200 million free trading shares – after just seven months of operation – in the companies it was paid to tout.

As it turns out, however, PennyStockChaser apparently received even more stock than the website actually disclosed. The SEC now claims that PennyStockChaser collected far more shares of Atlantic Wind & Solar (OTC: AWSL.PK) and MSE Enviro-Tech (OTC: MEVT.PK) – the very companies scrutinized in TheStreetSweeper’s past coverage of the website – than it reported to the public. Of the $2.4 million realized by PennyStockChaser through its scalping scheme, SEC figures indicate, roughly $1 million came from sales of AWSL and MEVT alone.

Fueled by PennyStockChaser’s paid touts, the SEC says, AWSL soared from 70 cents a share last July to $4.84 a share just three months down the road. AWSL had fallen to $3 when TheStreetSweeper published its story in November, less than a month after the stock peak, and has plummeted to just $2 a share since that time.

MEVT fared even worse. That stock, which jumped from 35 cents to $1.30 after PennyStockChaser touted the company, now fetches a mere 10 cents a share.

AWSL and MEVT feature other common traits as well. They share the same chairman – examined in detail by TheStreetSweeper in a previous story – and the same investor relations firm to boot.

Even PennyStockChaser lumped the two companies together when bullishly touting their shares.

“The same guys who brought us AWSL have brought us MEVT,” PennyStockChaser cheered during the height of the big company promotions last fall. “AWSL has made members a fortune, and we are sure MEVT will do the same … The stock could see a move to the $5 (range) and make members big money – if they move fast.”

Apparently, PennyStockChaser had already begun to make its own move by then. Through related entities, the SEC claims, the website’s owners sold 360,000 shares of AWSL for $780,600 in proceeds. They also sold 533,334 shares of MEVT, the SEC says, for another $240,000 in gains.

The SEC has now frozen the defendants’ assets, however, and is seeking full disgorgement of any ill-gotten returns. It hopes to secure penny-stock bars against PennyStockChaser – which liked to promote itself as the most popular website for “hot penny stock tips” – and its two owners as well.

To contact Melissa Davis, the author of this story, please send an email to editor@thestreetsweeper.org.


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