SEC shuts down PSC - Penny Stock Chaser

[Stock]

SEC targets Ryan, McKeown seek more time to respond

2010-07-22 14:34 ET - Street Wire
by Mike Caswell

http://www.stockwatch.com/newsit/newsit_newsit.aspx?bid=Z-C:*SEC-1742355&symbol=*SEC&news_region=C

Dan Ryan and Carol McKeown, the Montreal couple facing a scalping suit from the U.S. Securities and Exchange Commission, have made their first appearances in the case. On July 21, 2010, they filed motions requesting more time to prepare an answer. They say that they have been having financial difficulty hiring a lawyer because of the order that the SEC secured freezing their assets. Florida Judge James Cohn granted their request, giving the couple until Aug. 4, 2010, to respond to the case.

The SEC claims that Mr. Ryan and Ms. McKeown touted 65 U.S. companies through their website, PennyStockChaser, and via Facebook and Twitter. As they were touting the stocks, they were selling millions of shares of those same companies through Florida brokerage accounts, according to the SEC. The regulator claims they grossed $2.4-million from the scheme. (All figures are in U.S. dollars.)

Until now it was not clear whether the couple would answer the case before the deadline. They were not present for the first court date, a preliminary injunction hearing held in Fort Lauderdale on July 6, 2010. At that hearing, the SEC obtained an order freezing several bank and brokerage accounts that the couple held both in their own names and in the names of two companies they control, Meadow Vista Financial Corp. and Downshire Capital Inc. The freeze effectively extended an emergency order that the SEC had obtained without the couple's knowledge when it initially filed the suit.

With the deadline for them to file an answer approaching, the couple filed separate motions seeking more time. Ms. McKeown also sent a letter to the judge stating that she had spoken with several lawyers who expressed interest in the case, the only challenge being a lack of money. "As you can appreciate, we have complied with the asset freeze and this has left us with no financial ability to retain counsel," the letter reads. She filed the letter on behalf of her two companies, Meadow Vista and Downshire Capital. It was filed the same day as the couple filed the motions seeking more time to respond.

SEC's complaint

The SEC launched a civil complaint against Mr. Ryan and Ms. McKeown on June 23, 2010, in the Southern District of Florida. It claimed that they had been operating the PennyStockChaser website since at least April, 2009, and that they had used the site to tout dozens of pink sheets companies while failing to disclose that they were selling massive numbers of shares in those same stocks. According to the complaint, the only warning that investors received was a disclaimer posted on the site. It stated that the site's owners "may be selling shares of the stock at the same time the profile is being disseminated to potential investors; this should be viewed as a definite conflict of interest and ... the reader should take this into consideration."

The complaint included six examples of their touting, the most profitable of which was a Toronto company called Atlantic Wind and Solar Inc. The company, which claims to make rooftop solar panels, appeared on the PennyStockChaser site in an Oct. 14, 2009, posting. It read, "[Atlantic] closed at $2.10 yesterday and it is poised to go into break out mode, THIS PICK IS HEADED TO $10.00." Another post on Oct. 21 said that PennyStockChaser had spoken to Atlantic Wind and had learned that there was "big news" coming at the end of the week. The next day the stock went to $4.84 on volume of over one million shares. During the promotion, Mr. Ryan and Ms. McKeown sold 360,000 shares at price between $1.49 and $3.37, grossing $780,600, the SEC claimed.

The SEC also cited the couple's promotion of Bluewave Group Inc., a pink sheets company based in Fort Lauderdale that purports to be developing MP3 players, among other things. An April 19, 2010, posting on PennyStockChaser stated, "This story is going viral, [Bluewave] is on everyones lips, Monday morning is going to be amazing for [Bluewave]...WE are looking for a double or triple." The stock's volume rose to almost two million shares, up from total volume of 57,100 shares in the prior four months. As with the other stocks, Mr. Ryan and Ms. McKeown were selling as they were touting, the SEC said. With Bluewave, they sold 400,000 shares over three days, grossing $184,000.

(The SEC's complaint does not note that Bluewave's vice-president is Scott Storch, the music producer from Halifax who was connected to GenX Corp., a pink sheets company the SEC halted in July, 2009. The SEC cited concerns about the accuracy of the company's news releases as it transformed itself from a Vancouver-based uranium explorer to a Florida-based music company. It claimed to have the rights to negotiate the sale of Mr. Storch's catalogue, which included songs written by Mariah Carey, Beyonce, Chris Brown, 50 Cent and Justin Timberlake. The company is now defunct.)

The other stocks the SEC listed in its complaint were Avro Energy Inc., Biocentric Energy Holdings Inc., Converge Global Inc. and MSE Enviro-Tech Corp., which followed similar patterns.

The SEC is seeking disgorgement of ill-gotten gains, appropriate civil penalties and a permanent penny stock ban.

http://www.stockwatch.com/newsit/newsit_newsit.aspx?bid=Z-C:*SEC-1742355&symbol=*SEC&news_region=C