The U.S. Securities and Exchange Commission (SEC) has brought fraud charges, and secured an emergency asset freeze order against a Canadian man who it says was behind a platform of microcap stock promotion websites.
The SEC is alleging that John Babikian used AwesomePennyStocks.com and its related site, PennyStocksUniverse.com, to commit a form of securities fraud known as “scalping”, which involved touting a penny stock (America West Resources Inc.) via email, and immediately selling his own large position in the stock. The SEC says this generated ill-gotten gains of more than US$1.9 million.
The allegations have not been proven. In the meantime, however, the SEC has secured an order from a federal court judge in New York, which freezes Babikian’s assets, temporarily restrains him from further similar misconduct, requires an accounting, prohibits document alteration or destruction, and expedites discovery. The SEC says that Babikian was actively attempting to liquidate his U.S. assets, which are held by various front companies, and to wire the proceeds offshore.
According to the SEC’s complaint, Babikian, 26, used to live in Montreal, but left Canada in 2012 “in the wake of tax evasion charges by Canadian authorities”. It says that his current whereabouts are unknown, and that it’s believed that he holds passports issued by Lebanon, Nevis and Guatemala.
“The enforcement division, including its Microcap Fraud Task Force, is intensely focused on the scourge of microcap fraud and is aggressively working to root out microcap fraudsters who make their living by preying on unwitting investors,” said Andrew Ceresney, director of the SEC’s Division of Enforcement.
The SEC says its investigation is continuing, and it noted that Quebec’s Autorité des Marchés Financiers (AMF), the Financial Industry Regulatory Authority (FINRA), and OTC Markets Group Inc. have provided assistance.