(September 12) – The Ontario Securities Commission is warning investors of a two-stage stock scam involving worthless stock, “swaps” and salespeople claiming to represent legitimate U.S. companies.
The OSC says there are two stages to the scam. In stage one, an investor will be solicited by someone in Ontario purporting to work for a brokerage firm offering an incredible deal on a stock described as a once in a lifetime investment. The stock will likely be a U.S.-based OTC micro-cap stock worth fractions of a cent.
The brokerage house, while holding a large block of the stock, will actively promote the stock so that the price is driven significantly upward. Once a sufficient number of investors have over-paid for the stock, the brokerage house ceases to support the market for the stock and the value of the stock falls dramatically, usually to less than one cent per share.
When the victim tries to contact the brokerage house or the company in whose shares the victim has invested, the victim is surprised to find out that the brokerage house no longer exists and the issuer refuses to answer questions. The victim is left holding worthless stock for which there is apparently no demand.
The OSC says the investor will be victimized again if he or she is duped into stage two. A sales rep tells the victim that he represents a group of clients who had heavy tax burdens and who wished to alleviate such tax burdens by acquiring stocks that have recently declined. The rep proposes that the victim swap their worthless stocks for blue chip stocks held by the tax burdened clients. The rep says that for the purposes of the swap he can value the victim’s stocks at the price that the victim paid.
However, since a block of the blue chip stock is priced higher than the value of the victim’s micro-cap stock, the victim is required to pay an amount of money to cover the difference in the value of the stocks. The victim does not actually receive the blue chip stock. Accordingly, the victim is swindled a second time.
Complaints have been directed at both Money Concepts Capital Corp., based in Florida, and Money Concepts (Canada) Ltd. for their alleged involvement. However, the OSC says that the suspect committing the fraud is only using the names of legitimate firms to entice victims to part with their money.
The OSC asks that anybody solicited to invest or engage in a simialr stock swap or anybody having information pertaining to this or a similar scam or a suspect should contact the OSC and/or a local securities regulatory authority.
-IE Staff