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Trading in promoted stock MarilynJean Interactive $MJMI suspended by SEC

This morning the SEC suspended trading in MarilynJean Interactive (MJMI), which had recently been promoted by websites connected to the former Awesomepennystocks.com. The reason for the suspension was:

The Commission temporarily suspended trading in the securities of MJMI because of recent, unusual and unexplained market activity in the company’s stock taking place during a suspicious promotional campaign. This order was entered pursuant to Section 12(k) of the Securities Exchange Act of 1934 (Exchange Act).

SEC trading suspension (PDF)
SEC trading suspension order (PDF)

MJMI should resume trading at the open on September 12th. It was promoted by Mysoaringpennystocks.com and Risingpennystocks.net. See more info on the company at Promotion Stock Secrets.

mjmi

Disclaimer. I have no position in any stock mentioned above. I have no relationship with any parties mentioned above. This blog has a terms of use that is incorporated by reference into this post; you can find all my disclaimers and disclosures there as well.

The market for penny stocks is rarely efficient: Jet.com vs Jetcom

With the news that Wal-Mart is looking to buy Jet.com coming out two days ago, some geniuses looked to buy Jet.com to profit from the potential buyout. The problem is that Jet.com is not publicly traded anywhere. However, they found Jetcom, which is publicly traded on the grey market OTC (so no bids or offers are shown and market makers can’t make a market).

A quick look at the description of Jetcom (JTCMF) on OTCmarkets.com shows that it is definitely not the same company as Jet.com: it is reported to have been founded in 1968 and had a market cap of about $2 million as of two days ago. The company’s website is also defunct (Jetcom.com), the company’s address is in Canada, and its business description is “communications and media – cable and entertainment.”

Still, this minimal amount of due diligence proved too much for many traders and at its peak today JTCMF was up 2000% at $2.00 per share, up from $0.10 three days ago. Unfortunately because it trades on the grey market I cannot short JTCMF at Interactive Brokers; otherwise I would have shorted it. This is not the first time something like this has happened and won’t be the last. The most recent similar situation was Riviera Tools (RIVT). During its dumb run trading in RIVT was suspended by the SEC so there is a good chance of that happening to JTCMF.

[Edit August 8th: I see now that JTCMF was halted shortly after I published this blog post at 11:55 AM on August 5th. Meanwhile, Wal-Mart (WMT) has confirmed that it is buying Jet.com for $3.3 billion]

Disclaimer: No position in any stock mentioned. I have no relationship with any parties mentioned above. This blog has a terms of use that is incorporated by reference into this post; you can find all my disclaimers and disclosures there as well.

Samuel DelPresto and how to run big pumps and dumps

I never got around to blogging about this but did follow the case closely and had uploaded the plea agreement and indictment in this case. A good summary of the case is here. So here are the links:

Samuel DelPresto guilty plea agreement (PDF)

From the plea agreement:

If DELPRESTO enters a guilty plea and is sentenced on this charge, and otherwise fully complies with all of the terms of this agreement, this Office will not initiate any further criminal charges against DELPRESTO for his involvement in stock market manipulation schemes between in or about 2007 to in or about 2013 involving the publicly traded stock of the following companies, among others: Kentucky USA Energy, Inc., (“KYUS”); Mesa Energy Holdings, Inc. (“MSEH”); Bioneutral Group, Inc., (“BONU”); Clear-Lite Holdings, Inc., (“CLRH”); NXT Nutritionals Holdings, Inc., (“NXTH”); Empire Post Media, Inc. (“EMPM”); Mustang Alliances, Inc. (“MSTG”); IDO Security, Inc. (“IDOl”); Brainy Brands Co., Inc. (“TBBC”); Premier Brands Inc. (“BRND”); and LTS Nutraceuticals, Inc. (“LTSN”).

That is a very impressive list of pump and dumps.

Charges against Samuel DelPresto (PDF) — For some reason this is not called an indictment but it reads like one. It has a good explanation of how the pumps and dumps worked.

The SEC also filed a civil lawsuit against DelPresto.

Interestingly in light of the recent plea deal by the former head trader at BMA Securities (market maker BMAS on the OTC), the accounts listed for forfeiture include one account at BMA Securities. I have no evidence indicating anyone at BMA Securities was involved with DelPresto.

Greg Mulholland: Penny stock manipulator extraordinaire, gone but not forgotten

This post is a few months late, but I have included a few more recent details at the bottom. See the DoJ press release from May 9th.

From the press release:

Between 2010 and 2014, Mulholland controlled a group of individuals (the Mulholland Group) who together devised three interrelated schemes to: (1) induce U.S. investors to purchase stock in various thinly-traded U.S. public companies through fraudulent promotion of the stock, concealment of their ownership interests in the companies, and fraudulent manipulation of artificial price movements and trading volume in the stocks of those companies; (2) circumvent the IRS’s reporting requirements under the Foreign Account Tax Compliance Act (FATCA); and (3) launder the fraudulent proceeds from the stock manipulation schemes to and from the United States through five offshore law firms. Through these schemes, the Mulholland Group laundered more than $250 million in fraudulent proceeds.

To facilitate the interrelated schemes, the Mulholland Group used shell companies in Belize and Nevis, West Indies, which had nominees at the helm. This structure was designed to conceal the Mulholland Group’s ownership interest in the stock of U.S. public companies, in violation of U.S. securities laws, and enabled the Mulholland Group to engage in more than 40 “pump and dump” schemes. For example, this structure enabled the Mulholland Group to manipulate the stock of Cynk Technology Corp, which traded on the U.S. OTC markets under the ticker symbol CYNK. Using aliases such as “Stamps” and “Charlie Wolf,” Mulholland was intercepted on a court-authorized wiretap on May 15, 2014, admitting to his ownership of “all the free trading” or unrestricted shares of CYNK. Prior to this conversation between Mulholland and his trader at Legacy, there had been no trading in CYNK stock for 24 trading days. Over the next two months, the stock of CYNK rose from $0.06 per share to $13.90 per share, a more than $4 billion stock market valuation for a company that had no revenue and no assets.

Mulholland used the services of a U.S.-based lawyer to launder the more than $250 million generated through his stock manipulation of CYNK and other U.S. companies – directing the fraud proceeds to five law firm accounts and transmitting them back to members of the Mulholland Group and its co-conspirators. These concealment schemes also enabled Mulholland to evade reporting requirements to the IRS.

The plea change is here (PDF) although the details are not yet available. Mulholland’s sentencing is scheduled for August 23, 2016.

You can see some of the nice toys Mulholland has agreed to forfeit here (PDF), including a Dassault Falcon 50 private jet, a $5 million house in West Vancouver (3630 Mathers Avenue), multiple other properties in Belize in Canada, all funds in 26 different bank and securities accounts in Belize, Denmark, Cayman Islands, and the USA.

The original indictment of Mulholland and many others came back in September 2014.

Cantabio Pharmaceuticals $CTBO promoted on purported Alzheimer’s cure

A recent low-volume landing page pump and dump is of Cantabio Pharmaceuticals. See landing page here: http://biosciencereport.com/ctbo/main/ctv1.php

ctbo

Disclosed budget: $150,000 per week
Promoter: Biosciencereport.com / KyIne Ltd
Paying party: Ikon Media
Shares outstanding: 26,805,270
Previous closing price: $2.27
Market capitalization: $60 million

Disclaimer (emphasis added by me):

IMPORTANT NOTICE AND DISCLAIMER: This stock profile should be viewed as a paid advertisement. The BioScience Report is published by Kylne Ltd. In an effort to enhance public awareness of Cantabio Pharmaceuticals Inc. (“CTBO”) and its securities through the distribution of this advertisement, Ikon Media has provided the publisher with a weekly budget of approximately $150,000 to cover the costs associated with creating, printing and distribution of this advertisement. The publisher will retain any excess sums after expenses as its compensation. The publisher has not undertaken to determine if Ikon Media is, or intends to be in the future, directly or indirectly, a CTBO shareholder as it has no meaningful way to verify such facts. Readers should take this into consideration in evaluating bias. The name Cooper Stevens is a pseudonym for the editor who was paid $5,000 for his/her contributions to the report. If successful, this advertisement will increase investor and market awareness, which may result in increased numbers of shareholders owning and trading the common stock of CTBO, increased trading volumes, and possibly increased share price of CTBO’s common stock. This publication is not, and should not be construed to be, an offer to sell or a solicitation of an offer to buy any security. This publication, its publisher, and its editor do not purport to provide a complete analysis of any company’s financial position. The publisher and editor are not, and do not purport to be, broker-dealers or registered investment advisors. This publication is not, and should not be construed to be, personalized investment advice directed to or appropriate for any particular investor. Any investment should be made only after consulting a professional investment advisor and only after reviewing the financial statements and other pertinent corporate information about the company. Further, readers are advised to read and carefully consider the Risk Factors identified and discussed in the advertised company’s SEC filings. Investing in securities, particularly micro cap securities such as CTBO, is speculative and carries a high degree of risk. Past performance does not guarantee future results. This publication is based exclusively on information generally available to the public and does not contain any material, non-public information. The information on which it is based is believed to be reliable. Nevertheless, the publisher cannot guarantee the accuracy or completeness of the information. This publication contains forward-looking statements, including statements regarding expected continual growth of the featured company and/or industry. The publisher notes that statements contained herein that look forward in time, which include everything other than historical information, involve risks and uncertainties that may affect the company’s actual results of operations. Factors that could cause actual results to differ include the size and growth of the market for the company’s products and services, the ultimate degree of success in the company’s gaming apps in the near term and long term, etc. The BioScience Report is the publisher’s trademark. All other trademarks used in this publication are the property of their respective trademark holders. The publisher is not affiliated, connected, or associated with, and is not sponsored, approved, or originated by, the trademark holders unless otherwise stated. No claim is made by the publisher to any rights in any third- party trademarks.

Copy of pump landing page (PDF)

Life Clips $LCLP: The biggest recent landing page pump & dump

With the SEC and DoJ cracking down on illegal stock promotions (it is possible to legally promote a stock but misleading statements and manipulation are more effective) over the last couple years the number of effective pumps has declined tremendously. The number of hard mailer pumps with good volume has decreased from dozens per year to just one last year (Nugene NUGN) and none so far this year.

The only landing page promotion so far this year that has gotten much volume has been Life Clips (LCLP) and it is ongoing. I have been short Life Clips for awhile and it looks to be slowly fading now. The promotion landing page can be found at http://techstockinsider.com/wp-content/landing-pages/sitefiles/index.html and there is also a PDF version of the promotion: http://fliphtml5.com/nueh/ehcc

Life Clips is one of the few pumps actually paid for by the company itself. lclp_chart

Disclosed budget: $150,000
Promoter: Midam Ventures LLC / Techstockinsider.com
Paying party: Life Clips, Inc
Shares outstanding: 53.332.576
Previous closing price: $0.643
Market capitalization: $34 million

Below are a few ads for Life Clips that I have seen.

lclp_ad

Banner ad for LCLP on Ad Choices network on a stock trading website:

LCLP_ad2

LCLP disclaimer:

© 2016 TECHSTOCKINSIDER.COM. ALL RIGHTS RESERVED. PLEASE NOTE WELL: THIS LCLP STOCK REPORT IS A COMMERCIAL ADVERTISEMENT AND IS FOR GENERAL INFORMATION PURPOSES ONLY. WE ARE ENGAGED IN THE BUSINESS OF MARKETING AND ADVERTISING COMPANIES FOR MONETARY COMPENSATION. MIDAM VENTURES, LLC OWNER AND OPERATOR OF TECHSTOCKINSIDER.COM WAS PAID AN ADVERTISING FEE OF $75,000 CASH PER MONTH & ZERO RESTRICTED COMMON SHARES BY LIFE CLIPS, INC. (LCLP) FOR VISUAL SPONSORSHIP OF TECHSTOCKINSIDER.COM AND FOR VISUAL PLACEMENT LIFE CLIPS, INC. (LCLP) WITHIN WRITTEN MATERIALS. FOR A DURATION OF 30 DAYS BEGINNING 5/4/2016. & ENDING 11/3/2016 * PLEASE NOTE WELL: TECHSTOCKINSIDER.COM AND ITS EMPLOYEES ARE NOT A REGISTERED INVESTMENT ADVISOR, BROKER DEALER OR A MEMBER OF ANY ASSOCIATION FOR OTHER RESEARCH PROVIDERS IN ANY JURISDICTION WHATSOEVER AND WE ARE NOT QUALIFIED TO GIVE FINANCIAL ADVICE. TECHSTOCKINSIDER.COM WILL NEVER SELL, TRADE, BARTER, GIVEAWAY AND OR LOAN ANY INFORMATION PROVIDED TO TECHSTOCKINSIDER.COM. BY FILLING OUT THE ABOVE FORM YOU GIVE TECHSTOCKINSIDER.COM EXPLICIT PERMISSION TO CONTACT YOU. * OUR WEBSITE AND NEWSLETTER ARE FOR ENTERTAINMENT PURPOSES ONLY. THIS NEWSLETTER IS NOT A SOURCE OF UNBIASED INFORMATION. NEVER INVEST IN ANY STOCK FEATURED ON OUR SITE OR EMAILS UNLESS YOU CAN AFFORD TO LOSE YOUR ENTIRE INVESTMENT. THE DISCLAIMER IS TO BE READ AND FULLY UNDERSTOOD BEFORE USING OUR SITE, OR JOINING OUR EMAIL LIST. FULL DISCLAIMER CAN BE READ AT

PDF copy of pump.

Disclaimer. I am short LCLP and may close out or add to that position at any time. I have no relationship with any parties mentioned above. This blog has a terms of use that is incorporated by reference into this post; you can find all my disclaimers and disclosures there as well.

Algos for everyone: Interactive Brokers’ adaptive algo could be a great tool

Recently I wrote about customizing IB’s smart routing. Particularly for larger orders though it is desirable to break orders into smaller chunks so as not to give the market too much information which can lead to other traders front-running large orders. Iceberg orders work fine but are so-so at best at limiting information leakage — any trader watching time and sales on a stock will quickly notice if a small bid/offer keeps filling many more shares than are displayed. One solution is simply to send multiple different small orders by hand. This can be slow and increases the probability of fat-finger errors (selling/buying too many or too few shares by accident).

IB has multiple different algorithmic order types but until now they have been relatively esoteric and not geared towards the smaller trader. But with the introduction of IB’s adaptive algorithm order real power is given to small traders. Just tell the algorithm your limit price and how aggressive you want it to be and it will take care of the rest for you, splitting your order up, attempting to offer price improvement and good fills.

I tried the adaptive algo for the first time today with the patient setting on a short sell limit $0.42 for 3,000 shares of CJES. I had earlier sold 3,000 shares on the offer through NSX, getting an easy fill with low cost ($3.78 net commission).

Here is the chart of the stock as I was selling short:
adaptive-algo

Here are my fills:
cjes

One trade is not enough to draw any conclusions but the algo did a good job at splitting up my order and filling on the offer. I look forward to getting a chance to try the aggressive settings on this algo.

Disclaimer: I am short CJES. I have no relationship with any parties mentioned above (other than IB being one of my brokers). This blog has a terms of use that is incorporated by reference into this post; you can find all my disclaimers and disclosures there as well.

SEC Obtains asset freeze of trader who filed false $IDT takeover filing

On April 12th Nauman A. Aly made an SC-13D SEC filing indicating that a group of investors had taken a 5.1% stake in IDT Corp (IDT) and was offering to take over the company at a 65% premium to the then-current stock price. Soon after, a revised filing showed that the group had sold a number of call options and was no longer attempting to take the company over.

The SEC was able to identify the alleged perpetrator of the scheme, who used the same IP address to make the SEC filings as to access his trading account. And prior to the first filing he had bought a large number of short-dated out of the money calls that he quickly sold for $425,000 in profits (on a $18,500 initial investment). The SEC was able to freeze Aly’s brokerage account so the profits could not be withdrawn.

According to the SEC:

At 12:08 p.m., Aly filed a form known as a Schedule 13D on the SEC’s EDGAR system and falsely stated that his group of investors had a 5.1 percent beneficial ownership of IDT and had sent a letter to the board of directors offering to acquire all of the company’s shares for a price that represented a 65 percent premium.

The market reacted quickly to the filing, and IDT’s stock price increased by more than 25 percent in less than 10 minutes.

At 12:18 p.m., Aly sold all of the options for the illicit $425,000 profit. He then filed another Schedule 13D stating that his group of investors no longer owned more than 5 percent of IDT after his options sales.

Aly used the same IP address for the options trades that he used to make the false filings.

Aly’s group of investors never actually owned 5.1 percent of IDT and never contacted IDT to buy all of its shares.

This is not the first time someone has filed a false SEC filing to manipulate the market and it won’t be the last. Aly’s alleged actions were stupidly obvious but the next market manipulator might not be so dumb. Rather than acquiring short-dated out of the money call options, a smarter trader could wait until his false filing spiked the stock before then buying a bunch of short-dated out of the money put options. Still, to generate a significant profit the trade size would have to be large and those large and highly profitable trades would be a huge red flag, particularly if done in an account that has not made many similar trades.

Here is a 1-minute intraday chart of IDT showing the stock’s reaction to the false filings (click to embiggen): 2016-4-12 IDTI 1m fake buyout 13D

As you can see from the little green and red arrows I shorted IDT after it had already dropped most of the way back down. I regret being so slow to react to the false filings.

Disclaimer: I have no position in any stock stock mentioned above. I have no relationship with any parties mentioned above. This blog has a terms of use that is incorporated by reference into this post; you can find all my disclaimers and disclosures there as well.

SEC Suspends trading in NuTech Energy Resources (NERG) due to potentially fraudulent tender offer

Today the SEC suspended trading in NuTech Energy Resources (NERG):

because of questions that have been raised about the accuracy and adequacy of information in the marketplace about the company’s operations and the company’s recent public announcements concerning an unsolicited tender offer.

SEC trading suspension (PDF)
SEC trading suspension order (PDF)

When I first saw the tender offer I immediately concluded that it was almost certainly fraudulent:

nerg_warning

Why was this? Well, a quick look at OTCMarkets.com showed that the company had a total of 42,761,863,781 shares outstanding (42.7 billion shares). The buyout offer was for a price of $0.025 per share, which would value NERG at $1.07 billion. That is an absurd price to pay for a company with total assets of $5.7 million.

These kinds of fake buyout offers on sketchy OTC companies seem to happen one or two times per year. I can’t recall the last time I saw a sketchy OTC buyout offer that actually occurred so my default assumption on these is that they are fraudulent. In the world of OTC stocks, that is a very good assumption. There are occasionally real buyouts of OTC companies but those companies are invariably ones with real businesses with assets in proportion to the buyout price.

nerg_chart

Disclaimer No position in any stock stock mentioned above. I have no relationship with any parties mentioned above. This blog has a terms of use that is incorporated by reference into this post; you can find all my disclaimers and disclosures there as well.

Get SMART: Customizing Interactive Brokers’ smart routing

Interactive Brokers has been one of my main brokers since 2007. Yet I didn’t realize until today that you can customize the smart routing of orders. I was trying to figure out how to set a hotkey to set a market/ECN destination (route) and stumbled across the smart routing configuration which is even better than what I was looking for. Read IB’s description of how it works.

The simple explanation is that you can set the smart router to prioritize execution (in various ways) or prioritize ECN rebates. This only affects orders where you are adding liquidity (when you are taking liquidity the smart routing always prioritizes execution). For someone who trades a lot of low-priced stocks, ECN fees and IB’s per share commissions add up fast. By setting my smart routing to always go to the highest rebate venue I will dramatically lower my trading fees on low-priced stocks. Simply put, I should have looked into this long ago and saved thousands of dollars in commissions.

For the record, for adding liquidity on Nasdaq stocks under $1, the best route is NSX, which offers a rebate of 0.25% of the trade value.

Here is a screenshot of how I have my smart routing configured now:

SMART

Disclaimer: No position in any stock stock mentioned above. I have no relationship with any parties mentioned above except that Interactive Brokers is one of my brokers. This blog has a terms of use that is incorporated by reference into this post; you can find all my disclaimers and disclosures there as well.