A trio of Canadians have been charged by U.S. authorities over their roles in an alleged micro-cap market manipulation ring.
The U.S. Securities and Exchange Commission (SEC) secured court orders that freeze assets and provide other emergency relief to halt an alleged series of fraud schemes targeting retail investors.
According to the SEC’s complaint, from 2013 to 2019, those schemes generated more than US$6 million in illicit profits.
Among other things, the alleged schemes included pump-and-dump manipulations of micro-cap stocks, numerous fraudulent “scalping” schemes, and manipulative trading that included wash trading designed to give a false impression of micro-cap volume.
The three Canadians — Ottawa resident Michael Wexler, Oakville, Ont.-based attorney Ashmit Patel and a Canadian who lived in Grand Cayman, Andrew McAlpine — are also facing criminal charges brought by the U.S. attorney’s office for the Southern District of California.
None of the allegations have been proven.
Authorities allege that Wexler, Patel and McAlpine, along with a U.S. resident, Ongkaruck Sripetch (aka “King Richards” and “Shelby Saint-Claire”), “were members of a stock fraud ring that worked together to artificially inflate the prices of penny stocks, then quickly unload their own shares before the prices collapsed.”
The companies involved in the alleged pump-and-dump schemes included Ottawa-based VMS Rehab Systems, and U.S. firm, Argus Worldwide, the SEC said.
The SEC’s complaint indicated that Wexler was CEO of VMS Rehab, and that McAlpine was the former vice president of a now-defunct Belize-based broker dealer, Legacy Global Markets, S.A. — which was sued by the commission in 2015 for its role in a massive, international pump-and dump and money laundering scheme.
“As we alleged in the complaint, the defendants created a sophisticated network that enabled them to engage in multiple fraudulent schemes, making millions of dollars in unlawful profits at the expense of retail investors,” said Richard Best, director of the SEC’s New York office, in a release.
The current criminal charges follow an investigation that involved a co-conspirator in the schemes who turned into a confidential informant and cooperated with the FBI.
The list of criminal charges includes securities fraud, conspiracy, and manipulative trading. The SEC is also seeking permanent bans, disgorgement, and civil penalties.
McAlpine was arrested when he entered the U.S. from Grand Cayman, and Sripetch has also been arrested. The U.S. is seeking the arrest of Patel and Wexler, the SEC said.