(September 6 – 18:20 ET) – The Securities and Exchange Commission today announced 15 enforcement actions against 33 companies and individuals who used the Internet to defraud investors by engaging in pump-and-dump stock manipulations. A couple of cases have Canadian connections.
The SEC says the perpetrators of these market manipulations “pumped” up the total market capitalization of those stocks involved by more than US$1.7 billion, involving more than 70 microcap companies and illegal profits of more than US$10 million. The cases include 11 civil actions filed in U.S. District Courts throughout the country and four related administrative proceedings.
In one of the fraud schemes, the accused used Canadian brokerage accounts to hide their origins. The scheme involved New Directions Manufacturing, Inc., a small furniture manufacturing company. The Canadian brokerage firms identified in the SEC’s complaint were Yorkton Securities, Equitrade Securities, Merit Investment Corp., and Dominick & Dominick Inc.
The SEC says Rajiv Vohra and Sean Healey acquired blocks of free-trading shares of New Directions and then used “wash sales” to create the appearance of active trading. They then published false information on the Internet to promote the stock while they were selling their shares at a profit of more than US$500,000.
The SEC says Vohra and Healey attempted to conceal their scheme by conducting much of their activity through Canadian brokerage accounts held in the name of three Bahamian companies they controlled — Lantern Investments, Ltd., Lipton Holdings, Ltd. and Beaufort Holdings, Ltd.
In another civil complaint, the SEC alleges that Chill Tech Industries Inc., through its chief operating officer Lee Gahr, a resident of Vancouver, made numerous false and misleading statements through an Internet Web site, various press releases, phony unsolicited faxes, and a magazine article.
These statements concerned the “environmentally friendly” nature of Chill Tech’s “Arctic Can,” allegedly a self-cooling beverage can. The Arctic Can actually used Freon, a banned substance.
The SEC alleges that all the fraudulent statements were drafted or reviewed by Gahr, who ran the company pursuant to a management agreement; and that certain of these statements caused the price and volume of Chill Tech stock to increase between 15% and 94% in the short term.
While Gahr was disseminating the false press releases, he personally sold 1,056,500 restricted shares of Chill Tech common stock for a profit of US$277,136. The SEC is seeking permanent injunctions against Gahr and Chill Tech as well as disgorgement and prejudgment interest, and a civil monetary penalty against Gahr.
Today’s actions are part of the fourth nationwide Internet fraud sweep conducted by the SEC. The SEC has now brought more than 180 Internet-related enforcement actions.
-IE Staff