Fraud – Page 10 – Goode Trades

SEC Suspends trading in marijuana stocks SK3 Group $SKTO and Alternative Energy Inc $AEGY

This morning prior to the market open the SEC suspended trading in SK3 Group (SKTO) and Alternative Energy Inc. (AEGY). I first wrote about SKTO fifteen months ago, saying I thought it was at risk for a trading suspension. I was premature to say the least. But when both companies became marijuana companies earlier this year the odds of them getting suspended increased greatly and finally the SEC obliged. These suspensions are the tenth and eleventh suspensions of marijuana-related stocks this year by the SEC (the prior suspension was yesterday’s suspension of WBXU). The two stocks will reopen for trading at the market open on June 20th. Here is a list of marijuana stocks that have been suspended by the SEC this year: SKTO, AEGY, WBXU, FRTD, FSPM, PHOT, CDFT, PTOG, AVNE, CBGI, and CANN.

SEC suspension press release (PDF)
SEC suspension order (PDF)

From the SEC press release:

The Commission temporarily suspended trading in the securities of AEGY and SKTO because of
a lack of current and accurate information about the companies. There are questions regarding
the accuracy and adequacy of publicly available information about the business activities, the
control of the companies, and trading in the securities of both companies

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.

SEC Suspends trading in marijuana stock WebXU $WBXU

This morning the SEC suspended trading in WebXU (WBXU), a perennial pump and dump and new hemp company. This is the eighth suspension of a marijuana-related stock this year (the most recent suspension was of FRTD). WBXU was most recently promoted by StockMarketProfessor.com on May 22nd; see quote from disclaimer:

Stockmarketprofessor.com has been compensated up to Seven-Thousand Dollars Cash via bank wire transfer by a third party (Eden Media Group, LLC) for a 1 Day Marketing Program regarding WBXU.

The first compensated pump email I received on WBXU was from Awesomepennypick.com on March 29th, 2013.

SEC suspension press release (PDF)
SEC suspension order (PDF)

From the SEC press release:

The Commission temporarily suspended trading in the securities of WBXU because of
questions that have been raised about the accuracy and adequacy of publicly disseminated
information concerning, among other things, the company’s finances.

Baristas Coffee Company $BCCI files ‘audited’ quarterly financial statements

While accounting in real companies is usually boring, penny stock accounting is almost always exciting, whether it is a $100m+ market cap company with fewer total assets than I have in my checking account (like GHIL), companies with financial statements so badly faked as to make me suspect brain damage rather than intent to defraud, and now the case of the unaudited “audited” financial statements, courtesy of Baristas Coffee Company (BCCI).

First, I should thank the intrepid researchers on the Investorshub Due Diligence Fraud and Support Team message board for bringing this to my attention. Janice Shell was the first to notice the problems with the quarterly financial statements published yesterday by BCCI. See some of the replies (and more replies) to her post. The problem is that while the statements clearly state in multiple locations that they are audited, there is no auditor letter included with them. Furthermore, they are quarterly financial statements, which are generally never audited (though they normally pass auditor review). It is possible that the statements were audited and the company forgot to include the auditor letter. Perhaps worse is that the ‘audited’ statements don’t match the prior period unaudited statements. The starting cash ($0) on January 1, 2014 is different than the ending cash on Dec 31 ($43,645). And the intangible assets (which make up almost 95% of the company assets) drop by over $4 million between periods with no treatment on the income statement.

The CEO of Baristas Coffee Company, Barry Henthorn, doubled down on the ‘audited’ claim by issuing a press release this morning stating in part (emphasis mine):

Baristas Files Audited Financials – Moves Forward With Uplisting to Senior Exchange

Jun 05, 2014
OTC Disclosure & News Service

–

SEATTLE, June 5, 2014 (GLOBE NEWSWIRE) — Baristas Coffee Company, Inc. (OTCPK:BCCI), announced that it has completed its audited financials which meet PCAOB standards and has filed its first set of audited financials. The filing of audited quarterly financials for the period ending March 31, 2014 can be viewed at www.otcmarkets.com under Filings and Disclosures. Baristas will be filing amended audited 10K and 10Q financials for years 2012, 2013 in the next week. Subsequently the Company will be filing its Registration Statement and will become fully reporting and will up list accordingly to a senior exchange.

CEO Barry Henthorn stated: “Becoming fully audited was among the most significant steps towards moving to a senior exchange and becoming a fully reporting public company. All legacy adjustments are now reflected according to PCAOB auditing standards and only revenues that were completely verifiable through the audit were recognized. In addition all stock based compensation has been reflected appropriately of which the Company does not foresee any upcoming substantial issuances. The processes and accounting review policies are now in place to allow all future revenues to flow to the books of the company and to produce and review timely audited financial statements.”

It is quite possible that Baristas Coffee has actually had a real audit done on its financial statements but it makes no sense to me why they would put out their Q1 2014 financials prior to restating their financials for the last two years. If these financials are not produced soon then I believe Barsistas Coffee is at risk for an SEC trading suspension.

On a side note, DKM CPAs, which Baristas Coffee Company lists as it “accountant or auditor” in the filing yesterday. DKM previously received a nasty-gram from the PCAOB (PDF) two years ago.

Disclaimer: I have no position in any stock mentioned above. I have no relationship with any parties mentioned above. I have submitted my concerns to the 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 Most obviously fake financial statement I have ever seen, courtesy of $FRTD

There are few words that can adequately describe this quarterly report from non-SEC reporting company Fortitude Group (FRTD), which is currently suspended from trading after their absurd buyout press release. Read the 1st quarter report at OTCMarkets.com. There is so much idiocy in this report that I cannot do more than scratch the surface. But take a look at the cash flow statement for a start (on page 3).

The cash flow statement has the number of shares issued to pay for services as the dollar value of those shares, which of course don’t even belong in the “cash flows from operating activities.” The two acquisitions mentioned in the “cash flow from investing activities” section are just as nonsensical: it doesn’t matter that FRTD thinks those investsments are worth $38 million and $24 million — Fortitude Group didn’t pay those amounts in cash so they do not belong on the cash flow statement. The best part is that the “net increase in cash” of $63,194,456, when combined with the cash at the beginning of the quarter ($153) should add up to the “cash at end of period”; this is a very, very basic principle. But somehow FRTD only ended the quarter with $412,162. In other words, the company is off by over $62 million in its “net increase in cash”.

The balance sheet is just as bad: “stockholders equity” is, by definition, total assets minus total liabilities. But it also must equal the sum of paid in capital and retained earnings / accumulated deficit. For an example of how that works, look at the balance sheet of Livedeal (LIVE). The total stockholders equity is equal to the sum of the par value of all shares outstanding, the paid in capital, and the accumulated deficit. However with FRTD the resulting sum is $3,541,332 (and not $62,791,956).

[Edit 2014-6-9]: See George Sharp’s article on FRTD.

Disclaimer: I have 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.

For the record: SEC Suspended trading in Andalusian Resorts & Spas $ARSP a week ago

Okay this is a week late but Andalusian Resorts and Spas (ARSP) was an active promotion right before the SEC suspended trading in the stock so I felt that I should post it for future reference. It was promoted by StockCabin.com and LionPennyStocks.com on May 15th. ARSP will reopen for trading at the market open on June 3rd. Read Janice Shell’s article on ARSP. See the letter of intent to purchase Mona Lisa Hotel and Resort; it is likely that this proposed purchase is what resulted in the trading suspension.

SEC press release (pdf)
SEC suspension order (pdf)

From the SEC press release:

The Commission temporarily suspended trading in the securities of ARSP because of questions
concerning the adequacy and accuracy of assertions by ARSP, and by others, in press releases
and other public statements to investors concerning, among other things, the company’s business
combinations.

SEC Suspends trading in marijuana stock Fortitude Group $FRTD

This morning at about 9:00 AM the SEC suspended trading in Fortitude Group Inc (FRTD), the seventh suspension of a marijuana stock this year. FRTD joins FSPM, PHOT, CDFT, PTOG, AVNE, and CANN on the list of marijuana stocks that have been suspended by the SEC this year. FSPM will begin trading again at the open on June 2nd. In connection with the suspension the SEC issued an investor alert about penny stock fraud in marijuana companies.

SEC suspension press release (PDF)
SEC suspension order (PDF)

The suspension of FRTD should not be a surprise to anyone who follows me on Twitter — I predicted it four days ago after the company put out a horribly sketchy press release about a buyout offer from an unnamed OTCQB company that valued FRTD at $0.12.

I give $FRTD two weeks tops before an SEC trading suspension following their absurd buyout PR http://t.co/QME6gBhCGs

— Michael Goode (@goodetrades) May 19, 2014

From the SEC press release:

The Commission temporarily suspended trading in the securities of FRTD because of
questions that have been raised about the accuracy and adequacy of publicly disseminated
information concerning, among other things, the company’s operations.

The Commission acknowledges FINRA’s assistance in this matter.

SEC Suspends trading in another marijuana stock: FusionPharm $FSPM

This morning at about 9:25 AM the SEC suspended trading in FusionPharm (FSPM), the sixth suspension of a marijuana stock this year. FSPM joins PHOT, CDFT, PTOG, AVNE, and CANN on the list of marijuana stocks that have been suspended by the SEC this year. FSPM will begin trading again at the open on June 2nd. In connection with the suspension the SEC issued an investor alert about penny stock fraud in marijuana companies.

SEC suspension press release (PDF)
SEC suspension order (PDF)

From the SEC press release:

The Commission temporarily suspended trading in the securities of FusionPharm due to a lack of
current and accurate information about the company because of questions that have been raised
about the accuracy and adequacy of publicly disseminated information concerning, among other
things: (1) the company’s assets; (2) the company’s revenues; (3) the company’s financial
statements; (4) the company’s business transactions; and (5) the company’s current financial
condition. This order was entered pursuant to Section 12(k) of the Exchange Act

Revenue Québec obtains lien against Robert Kalfayan’s home in continuing fight against Awesomepennystocks

Robert Kalfayan has been implicated in running Awesomepennystocks along with John Babikian. So far though the SEC has not sued him and until yesterday Canadian authorities had not gone after him either. But yesterday Jean-Francois Cloutier reported (article in French) that Revenue Québec had obtained a lien against a house owned by Kalfayan in the amount of $385,000.

See Google’s translation here.

Disclaimer: 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.

Update on SEC v. Babikian

From May 12th, 2014:

Filed & Entered: 05/12/2014: Memorandum of Law in Opposition to Motion

37-1 (PDF)
37-2 (PDF)
37-3 (PDF)
37-4 (PDF)
37-5 (PDF)
37-6 (PDF)
37-main (PDF)

Many of the exhibits above relate to the troubles Babikian’s shell company Oriwa Villas SA has had selling the 1401 Londonderry property in Los Angeles — the buyer wired money to Oriwa but Oriwa did not record a deed transferring the property to the buyer.

SEC Suspends trading in Stocktips.com pump & dump Pingify $PGFY

This morning at about 9:25 AM the SEC suspended trading in Pingify (PGFY). Trading will reopen at the market open on May 29th. Pingify was the current promotion by StockTips.com, which is by far the most effective currently active stock promoter. The emails from Stocktips.com promoting PGFY disclosed expected compensation of $6.5 million. Stocktips.com used images for disclaimers and has already deleted all mentions of PGFY from their website and has deleted the images. Below is the text of the Stocktips.com PGFY pump email I received at 8:41 AM this morning:

Hello StockTips.com Member!

Hey kids. Statler here. Today could be the day I have been speaking about for PGFY!!!

The Tipping point appears to be imminent for PGFY…

Remember yesterday I told you about PGFY looking extremely poised for a MASSIVE BREAKOUT???

Well I think PGFY is about to “BREAKOUT”

Again, “Remember the 2.00…” I believe you should keep that number very close in your minds eye… As PGFY seems poised to pop and I would not be surprised to see it run to 2.00 starting today!

I think this is the last time we see PGFY at these levels.

Everyone is now talking about PGFY‘s potential breakout…

For those of you living on planet Mars, let me tell you about what I see with PGFY and why I simply love PGFY:

PGFY is in a WHITE HOT market. The mobile market, especially after the Facebook acquisition of Whatsapp for 19 Billion (yes that’s billion with a “B”) is one of the hottest in the world. And this is where PGFY plays.

Hot product – The PGFY app addresses the massive problem of information overload. Their app sends messages to users phones called “Pings” that contain short, targeted, relevant messages that help users cut through the clutter and get just what info they want, when they want it.

Super hot timing – The massive successful beta test with Ebay has proven the PGFY concept out. When this relationship begins generating revenue, we could see parabolic gains.

I know that you understand how important timing is when trading stock. If you catch the right window of time on a deal you can make a killing and if you miss that window then you are plain out of luck. So reading emails is fine… Googling around and reading reviews of a deal is fine. All of it is fine… Up to a point. And then you have to act.

So you see if you have been on the fence with PGFY I get it. There were rough waters for a while. But I truly believe in my heart that the storm has past and we could see massive gains on PGFY!

So what are you going to do?

Happy Trading,

Mike Statler
Co-Editor, StockTips

Below is a copy of Stocktips.com’s disclaimer on PGFY (underlining not in the original):

(click image to enlarge)

SEC suspension press release (PDF)
SEC suspension order (PDF)

From the SEC press release:

The Commission temporarily suspended trading in the securities of PGFY because of concerns
regarding potential manipulative activity in Pingify’s common stock that appears to be related
to a promotional campaign currently being conducted through various Internet web sites. This
order was entered pursuant to Section 12(k) of the Securities Exchange Act of 1934 (Exchange
Act).

This trading suspension was not a surprise to me. I thought it highly likely a few days ago but was too cheap to pay the hard to borrow fees at Centerpoint Securities the last couple days to short. (I am short 1,000 shares at Interactive Brokers).

And this is why $PGFY will get an SEC trading suspension: http://t.co/xZcAOQgGJE // no position

— Michael Goode (@goodetrades) May 9, 2014

pgfy

Disclaimer: I am short 1,000 shares of PGFY. 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.