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SEC secures $150,000 (U.S.) fines for Ryan, McKeown

2011-05-25 14:15 ET - Street Wire

Also Street Wire (U-*SEC) U.S. Securities and Exchange Commission
Also Street Wire (U-AWSL) Atlantic Wind & Solar Inc
Also Street Wire (U-BLEW) Bluewave Group Inc


by Mike Caswell

The U.S. Securities and Exchange Commission has secured $150,000 civil penalties against each of Dan Ryan and Carol McKeown, the Montreal promoter-couple charged for a scalping scheme. (All figures are in U.S. dollars.) The fines are contained in separate orders entered on Monday, May 23, by Florida District Judge James Cohn. The penalties, which are in addition to a previously entered $3.79-million disgorgement order, represent a negotiated settlement in which the couple did not admit to any wrongdoing.

The SEC claims that Mr. Ryan and Ms. McKeown used their website, called PennyStockChaser, to promote 65 companies trading on the U.S. markets. In exchange, they received millions of shares, some of which they sold during the promotions while failing to properly disclose the sales.

The case proceeded mostly without participation from Mr. Ryan and Ms. McKeown. In July, 2010, Ms. McKeown wrote a letter to the judge, explaining that she and her husband had no financial ability to defend themselves as the SEC had frozen their assets. The couple did not file a formal answer to the allegations, and the SEC won a default judgment against them on Jan. 25, 2011. The judgment imposed the $3.79-million disgorgement order and permanently banned the couple from penny stocks. Judge Cohn also allowed the SEC to seize their frozen brokerage accounts in Florida, valued at $943,802.

SEC's complaint

The SEC launched the case on June 23, 2010, when it filed a civil complaint in the Southern District of Florida against the couple and two private companies they control, Meadow Vista Financial Corp. and Downshire Capital Inc. The complaint cited the couple for touting stocks on Facebook, Twitter and their website, and through daily e-mails and text alerts.

The SEC listed six examples of their promotions, the most profitable being that of Atlantic Wind and Solar Inc., a Toronto company that touts itself as a developer of "rooftop solar energy parks." A posting on PennyStockChaser dated Oct. 14, 2009, read, "[Atlantic] closed at $2.10 yesterday and it is poised to go into break out mode, THIS PICK IS HEADED TO $10.00." Exactly one week later, another post said: "PSC spoke to the company today and they tell us that members should buckle in. Big news is coming at the end of the week."

The next day, the stock reached an all-time high of $4.84 on volume of over one million shares. The SEC claimed that Mr. Ryan and Ms. McKeown sold 360,000 shares at prices between $1.49 and $3.37, grossing $780,600. (The stock has since declined to $1.04, which the company partly attributes to three stock dividends.)

Another example cited by the SEC was that of Converge Global Inc., a Utah pink sheets listing that claimed to be a property developer. On May 14, 2009, a posting on PennyStockChaser stated that the company "rose over 400% since our last alert." Another posting on June 13, 2009, stated that the company was on "news watch" for a "100% - 300% move." The stock, which was trading around two cents before the promotion, rose to four cents and its volume increased by more than 50 times to 16 million shares per day. The SEC said that Mr. Ryan and Ms. McKeown sold 6.3 million shares, grossing $602,000.

During the promotions, the couple provided no proper disclosure of their share sales, the complaint stated. Their website only contained a disclaimer, which stated that the site's operator "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 other four stocks that the SEC listed in its complaint were Avro Energy Inc., Biocentric Energy Holdings Inc., Bluewave Group Inc. and MSE Enviro-Tech Corp., which followed similar patterns to Atlantic Wind and Converge Global.

The SEC sought disgorgement of ill-gotten gains, appropriate civil penalties and permanent penny stock bans. With the imposition of the civil penalties, the case against the couple is now complete. As part of the order, they agreed to pay the fines within 14 days.


http://www.stockwatch.com/News/Item.aspx?bid=Z-C%3a*SEC-1844882&symbol=*SEC®ion=C

"The penalties, which are in addition to a previously entered $3.79-million disgorgement order, represent a negotiated settlement in which the couple did not admit to any wrongdoing."

More like sqealing on others would be my guess and more to come from investigations. SEC is slow, but sometimes do get there. No problem coming up with the $150k in a couple of weeks I guess.