Category: Fraud

Yappn Corp (OTCBB: YPPN) fake pump and dump

What is an even better sign of an impending collapse in stock price than a pump and dump? A fake pump and dump! There are enough traders that buy pump and dumps that a large shareholder in a company, rather than paying big money for a large hard mailer campaign or paying a bunch of email promoters to promote their stock, can simply pretend to have spent big money on a stock promotion and then leak news of the stock promotion to traders on message boards, on Twitter, and in chatrooms. This is what appears to have happened with Be Active Holdings (JALA) back in March. See my blog post on that promotion, which purportedly had a $2.5 million budget but was almost certainly overstated; I was dubious at the time and recommended against buying the stock. While JALA had two nice up days it soon dumped hard and left many with huge losses. I never saw evidence of any hard mailers sent out promoting the stock.

jala

 

Yappn Corp (OTCBB: YPPN) appears to be much the same but it looks like whomever put it together has put even less effort into it.  The pump page is not very long at all and it appears that little work was put into it. The disclaimer is similar:

CAC plans on spending a production budget of up to $2, 150, 000 on postage, printing, publishing, and marketing for the benefit of advertising Yappn Corp. through direct mail and on the internet. The officers and directors of CAC are currently holding six million three hundred thirty five thouand shares of YPPN common stock and reserve the right to buy more or sell these shares without prior notice.

Note that it doesn’t state that they have spent $2.15 million, only that they ‘plan’ to spend that much. I would be surprised if they spent more than $10,000 or so total, with all of that paying for the pump website. The market cap of Yappn is already insane so I believe this stock will go almost straight down. I would call this perhaps the best short opportunity of the year. Unfortunately I have not yet found shares to short.

Promoter: Catalina Advertising Corporation
Paying party: ??

Shares outstanding: 142,500,000
Previous closing price: $0.75
Market capitalization: $106 million

yppn

 

Full disclaimer:

Important Disclaimer and Disclosure: YPPNReport.com is a newsletter service of Catalina Advertising Corporation (CAC). (CAC) is not a registered financial advisory. The information presented here is not an offer to buy or sell securities, it is solely meant to be an advertisement for Yappn Corp. CAC does not guarantee as to the accuracy of the information in this newsletter, it was taking entirely from public sources. Penny Stocks are considered to be highly speculative and may be unsuitable for all but very aggressive investors. CAC plans on spending a production budget of up to $2, 150, 000 on postage, printing, publishing, and marketing for the benefit of advertising Yappn Corp. through direct mail and on the internet. The officers and directors of CAC are currently holding six million three hundred thirty five thouand shares of YPPN common stock and reserve the right to buy more or sell these shares without prior notice. Investors should also be aware that this will affect the stock price. This report does not provide any analysis of the company’s financial position. The featured company’s financial position and all other information regarding the featured company should be verified directly with the company. The target price was based on an assumption of one percent of facebook’s market cap success, please always consult a registered financial advisor before making any stock purchase decisions.

PDF copy of pump page.

[Edit 2013-6-3]: I saw a search ad linking to YPPNReport.com on Yahoo:

yppn

Disclaimer: I have no position in any stock mentioned and 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.

Snitches get riches: Inform on stock fraudsters to make a lot of money

One question I always get asked is: “How can I make money in penny stocks?” The answer I always give is that outside of becoming a stock promoter (which I obviously do not recommend), the easiest way to get rich in penny stocks is to steal money from stock promoters and the insiders who put together companies for the sole purpose of being promoted. The most successful of those individuals almost invariably have secret overseas bank and brokerage accounts that they use to sell their shares and avoid detection. Obviously, my recommendation to steal from them is not serious. However, there is a perfectly legal and ethical way to take their money: inform on them to the government. The methods they use to conceal their fraud require more people to know about their fraud. Each bank or brokerage employee that knows about an account being used to liquidate large positions in a pump and dump is a potential whistleblower. And with the SEC’s new whistleblower program, those individuals can be well compensated for informing the SEC about stock fraud.

The SEC has indicated that it is making good use of its new power to compensate whistleblowers:

  Within the Miami office, Bustillo continued, the enforcement and examinations programs work in close collaboration—a partnership that has given rise to “many of our most important cases.” In addition, the office also handles a number of cases based on TCR—tips, complaints, and referrals.

In gearing up for the launch of its whistleblower bounty program, the commission established a single, searchable database system of records for the tips, complaints, and referrals it receives about possible securities law violations. Bustillo explained that the new TCR system was intended to allow staff to “connect the dots” more quickly as information comes into the system. As such, “what looked like a very small fraud cases can quickly be identified as a much larger scheme.”

TCRs “have quickly become a great source of … cases for all of our regional offices,” and for headquarters, Bustillo said.

Similarly, the whistleblower program has become a great source of sound, actionable information that is allowing enforcement staff much more quickly to identify cases that might otherwise have gone undetected—cases in which the fraud “is of such a nature that unless somebody actually points it out to us, is very difficult to recognize.”

(The above is from the Bloomberg Newswire article “Suits Against Gatekeepers Likely In Microcap Arena, Bustillo Says,” by Phyllis Diamond. Read more here.

Perhaps more useful for informers than the SEC whistle-blower program is the IRS whistle-blower program. Most individuals who commit stock fraud will also commit tax fraud because they will not report their income in overseas accounts that they use to sell their shares in promoted companies. The IRS has more manpower and resources than the SEC and fines for tax fraud are much higher. Consequently, awards to whistle-blowers can be quite high. So I encourage anyone with evidence of hidden insider selling of shares in promoted companies to find an experienced tax whistle-blower lawyer and file a claim/complaint with the IRS.

A recent example of an IRS tax fraud case against penny stock insiders is the case against Stephen Kerr and Michael Quiel, who were recently convicted of selling millions of shares of SEFE in foreign accounts and not reporting the proceeds to the IRS.

From the April 12th Justice Department press release:

A jury convicted Stephen M. Kerr and Michael Quiel yesterday on federal tax charges stemming from their failure to disclose secret offshore bank accounts in Switzerland, the Justice Department and Internal Revenue Service (IRS) announced. Kerr and Quiel, prominent Phoenix businessmen, were each convicted of two counts of filing false individual income tax returns for 2007 and 2008. Kerr was also convicted of two counts of failing to file a Report of Foreign Bank and Financial Accounts (FBAR). San Diego attorney Christopher M. Rusch had previously pleaded guilty to conspiracy to defraud the government and failing to file an FBAR on Feb. 6, 2013.

According to the evidence presented at trial, Kerr and Quiel, with the assistance of Rusch and others, including Swiss nationals, established nominee foreign entities and corresponding bank accounts at UBS AG and Pictet & Cie to conceal Kerr and Quiel’s ownership and control of stock and income that were deposited into these accounts. Rusch testified at trial, admitting that he and others caused the sale of the shares of stock through the undeclared accounts. Kerr also hired Rusch to facilitate the domestic sale of 11.4 million shares of stock held in the name of a foreign entity controlled by Kerr and to transfer the proceeds from the sale of the stock to an undeclared foreign account at UBS AG to conceal that the money was income to Kerr that should have been reported on his tax returns.

For more information, see:

IRS whistle-blower website
SEC whistle-blower website

Disclaimer: I have no position in any stock mentioned above and no relationship with any parties mentioned above. I have never acted as a whistle-blower for either the IRS or SEC and I do not know anyone who has. 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 subpoenas Andrew Farmer and Iridium Capital in connection with Chimera (CHMR) investigation

Yesterday the SEC subpoenaed Andrew Farmer and Iridium Capital after they failed to provide documents requested by the SEC in its investigation of the pump and dump of Chimera Energy (Grey market: CHMR) and “whether the claims in Chimera’s press releases are materially false or misleading.” CHMR previously had its trading suspended by the SEC last October after Infitialis accused the company of lying in press releases.

CHMR Trading suspension
SEC Litigation release
Infitialis CHMR article part 1
Infitialis CHMR article part 2

The investigation of this alleged stock fraud seems to be proceeding more quickly than is normal for the SEC although CHMR’s alleged lies were blatant: the company said it had a join venture with Pemex and the head of Pemex investor relations denied having any knowledge of Chimera.

From yesterday’s litigation release:

The SEC’s application explains that beginning in July 2012, Chimera commenced a promotional campaign that caused a dramatic increase in the trading volume and price of its stock. The SEC is investigating, among other things, whether the claims in Chimera’s press releases are materially false or misleading. On October 25, 2012, the SEC temporarily suspended trading in the securities of Chimera because of questions concerning the accuracy and adequacy of publicly disseminated information about, among other things, Chimera’s business prospects and agreements.

As part of its investigation, the staff in the SEC’s Fort Worth Regional Office issued subpoenas to Farmer and Iridium in December 2012 seeking, among other things, materials related to their transactions in Chimera securities and to Chimera’s business. According to the SEC’s court papers, Farmer played an integral role in Chimera’s transition from a privately held to a publicly traded company. And, before Chimera’s securities became available for purchase to the public on the over-the-counter market, entities controlled by Farmer or for which Farmer acted as agent acquired millions of Chimera shares in private transactions, while Iridium, which Farmer also controlled, assisted in effectuating these transactions. According to the court papers, once Chimera’s promotional campaign was under way, entities controlled by Farmer sold to the public a substantial number of their privately obtained Chimera shares, generating hundreds of thousands, if not millions, of dollars in profits.

 

Disclaimer: I have no position in any stock mentioned above and 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.

Face Up Entertainment (OTCBB: FUEG) suspended by the SEC

Today the SEC suspended trading in Face Up Entertainment (OTCBB: FUEG), a stock that has been pumped and dumped and repumped countless times. FUEG was most recently promoted by WFWS Consulting Inc (WhisperfromWallstreet.com / OTCStockExchange.com) and Stock Appeal LLC websites (LiquidPennies.com / VIPStockAlerts.com / HeroStocks.com /StockHunter.us / StockBrain.net). It appears that the SEC has become more aggressive in suspending trading in active stock promotions: EDVP was suspended one month ago.

WFWS Consulting Inc. has been paid $5,000 cash by Stock Appeal LLC.
for the purpose of increasing public awareness of FUEG

 

Currently, Stock Appeal LLC has been compensated up to $35,000 USD for increased public awareness of FUEG by a Compass Capital LTD, third party.

SEC suspension notice (pdf)
SEC suspension order (pdf)

The reason for the suspension:

The Commission temporarily suspended trading in the securities of Face Up because of
questions concerning the adequacy and accuracy of publicly available information about Face
Up, including, among other things, its financial condition, the control of the company, its
business operations, and trading in its securities.

1 year chart of FUEG (click to embiggen):

fueg

[Edit 2013-4-5]: FUEG Insiders arrested and criminal complaint unsealed:

DOJ press release
Criminal complaint (pdf)

Excerpt from the press release (that quoted the criminal complaint):

FUEG was a publicly traded company that was purportedly involved in the reality gaming social network market with its principal place of business located in Valley Stream, New York. As captured through judicially authorized wiretap interceptions, the defendants coordinated control over a significant portion of FUEG shares and then promoted the stock through the dissemination of false press releases sent over the Internet. In addition, the defendants coordinated trading of FUEG shares to create the impression of increased trading volume to make FUEG appear to be an attractive purchase for unsuspecting investors. However, the defendants were unable to reap a profit from trading FUEG stock timed to the promotions, and their scheme ultimately failed.

As a result of the failed promotion of FUEG stock, GOLDSHMIDT, PUZAITZER, VAX, ORENA, GROSSMAN, AKSANOV, and KOIFMAN conspired to extort one of their co-conspirators, referred to as “CC-1” in the Complaint. In the summer of 2012, AKSANOV, KOIFMAN, GOLDSHMIDT and PUZAITZER met with CC-1 in New York, New York, and demanded that CC-1 pay them $350,000 and return shares of FUEG, or AKSANOV would “put slugs into” CC-1’s chest.

In several subsequent telephone calls and meetings, various defendants continued to demand that CC-1 repay them for their stake in the failed FUEG scheme, or they would harm CC-1. During a meeting on or about March 5, 2013, GOLDSHMIDT, PUZAITZER, ORENA and VAX met with CC-1 at a hotel in New York City and further threatened CC-1 and CC-1’s family if CC-1 did not comply with their demands.

The suspension is likely related to the numerous press releases that FUEG has put out over the last couple months:

 

Disclaimer: I have no position in any stock mentioned. 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.

They’re back! Stock Castle, spam stock promoter, now pumping LSE:AIM listed Mercom Oil

Stock Castle (which is how we traders refer to this spam stock promoter even though they have used a huge number of different websites and names) is back, this time promoting a London AIM exchange-listed company, Mercom Oil (MMO:L). Most recently Stock Castle promoted USGT. Stock Castle is a spammer that has been sued by penny stock gadfly George Sharp; prior to USGT they promoted BRND, IDOI, and MSTG.

I cannot remember the last time I saw a British stock pumped — German and Canadian pumps have been far more common (although German pumps are much less common than they used to be), although the US OTCBB and OTCMarkets remain the most popular place to run pump and dumps. Mercom is interesting also because it has had a lot of volume over the past few months.

I will most likely not trade Mercom Oil, although I subscribed to LSE quotes at Interactive Brokers for a month (only $7.50 so worth it). Mercom is not currently shortable at Interactive Brokers.

Compensation: $50,000

Promoter: TheBestStocks.net (a Stock Castle spam website, owned by Dramtil Networks LTD of Belize)

Paying Party: Tigrez Patch LTD

Disclaimer:

TheBestStocks.net has received fifty thousand dollars from Tigrez Patch LTD, who was paid by a third party for the sending of this email/newsletter.

MMO multi-month chart:
mmo

Disclaimer from TheBestStocks@changedonline.com:

mmo_disclaimer

Disclaimer on USGT pump that I previously received from hot@changedonline.com:

usgt_disclaimer

 

Disclaimer: I have no position in any stock mentioned above and 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.

SK3 Group (OTCBB: SKTO) easy short for anyone with tons of spare cash

SKTO is likely to be suspended by the SEC. See all the reasons why in this post on Promotion Stock Secrets. This presents a nice low-risk shorting opportunity. However, due to the low stock price it is not yet a large enough opportunity to entice me.

Interactive Brokers has 4 million shares of SKTO to lend with a 1.25% APR borrow rate. That gets charged on collateral ($1.00 per share) so it is the equivalent of a 25% APR on the value of any short position. With a stock price of $0.05, to short 40,0000 shares requires $100,000 in cash and gets you a $2,000 position. Assuming that SKTO gets an SEC suspension within a couple weeks and drops 75% you cover for $500 and pay $42 for the borrow for one month and you make $1.46% on your $100k of capital used in one month. Very nice low risk trade for anyone who has tons of spare cash. That doesn’t describe me so I’m hoping SKTO stocks goes up a lot more. At $0.10 and above the short starts looking really nice.

skto

Here is the chart of another scam company that was suspended by the SEC not long ago, Southridge Enterprises (SRGE):

srge

 

Disclaimer: I have no position in any stock mentioned above and 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 takes stand against wash trading

A week ago the SEC issued a litigation release stating that it had sued Robert C. Crane for market manipulation and had already obtained a settlement. What is unusual is that while Crane engaged in wash sale trading in an apparent attempt to “create the false appearance of an active and liquid market for two securities,” his attempts were unsuccessful and he did not profit from the scheme. The SEC obtained a penny stock bar against Crane but did not seek a financial penalty.

Some have said that this is a waste of the SEC’s time when they could be acting against people who actually profit from their malfeasance. I agree with the SEC’s actions in this case because it sends a clear message that manipulative trading is illegal and will be investigated. You don’t have to do it well and make lots of money for the SEC to come after you. I can only hope that the SEC is investigating wash trading in large pump and dumps (like those of Awesomepennystocks.com) and looking to bring the hammer down on those traders as well.

Litigation release
SEC complaint

From the complaint:

17. In June 2010, Crane executed wash sales in Argentex and ERHE stock.

18. In each of the wash sale transactions, Crane bought and sold shares of stock from one
ofhis accounts into another one of his accounts with no change ofbeneficial ownership over
those securities. He paid a commission on both sides ofthe transaction. The scheme was
designed to create the appearance ofan active and liquid market for those securities.

19. By engaging in these wash sales, Crane compromised the integrity ofthe market by
creating the appearance of genuine trading activity for the securities in which he transacted. In
fact, Crane’s trades frequently inflated the volume, and, on one occasion, the price ofthe
securities he manipulated.

Disclaimer: I have no position in any stock mentioned above and 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 sues penny stock lawyers Luis Carillo & Wade Huettel & others for pump and dumps

The SEC sued penny stock lawyers Luis Carillo and Wade Huettel along with a bunch of other people in a lawsuit filed today. Carillo & Huettel have served as the legal counsel and given opinion letters to make restricted stock free trading in dozes of huge pump and dump companies, including Aweseomepennystocks.com pumps such as NSRS, SNPK, and PRTN.

See the PumpsandDumps.com article on Carillo & Huettel (the firm) shutting its doors. I wonder if this lawsuit might make other crooked penny stock lawyers think twice about abetting stock fraud. Only time will tell.

SEC ligitation release
SEC Legal complaint (PDF)

From the litigation release:

The SEC alleges that San Diego-based attorneys Luis Carrillo and Wade Huettel were central participants in the scheme who helped the promoters conceal their ownership interests in the companies, drafted misleading public filings, and provided misleading legal opinions. As part of the scheme, their law firm, Carrillo Huettel LLP, secretly received proceeds of stock sales in the form of a sham “loan.”

 

Also sued were the Kirks and their company Skymark Research, who have been sued before. The companies involved in the pumps were also named: Pacific Blue Energy (PBEC) and Trade Show Marketing Company (TSHO):

According to the SEC’s complaint, Canadian stock promoters John Kirk, Benjamin Kirk, Dylan Boyle, James Hinton, and their associates, used false and misleading promotions to pump up trading in the stock of the two microcap companies and made millions when they secretly dumped their own shares. Microcap companies typically have limited assets and low-priced stock that trades in low volumes. The SEC alleges that the promoters sent investors false and misleading emails about the companies through two websites they controlled, Skymark Research and Emerging Stock Report, and used “boiler room” sales calls to tout the stocks, falsely claiming that the recommendations were based on independent research by Skymark and Emerging Stock Report.

 

Disclaimer: I have no position in any stock mentioned above and 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 to Hunter Twins: Here’s a slap on the wrist, now get back to screwing investors

The SEC settled its lawsuit against Britain’s Hunter twins with perhaps the single worst settlement in the history of the agency. For $175,000 the Hunter Twins settled all the charges. Considering how blatant their fraud was (see my blog post about it from April 20th, 2012) I find it nothing short of stupefying how little the SEC settled for. Janice Shell reminded me that there is a parallel criminal case against the twins; I will update this post when I find out what has been going on with that.

The brothers settled for less than 10% of the total alleged profits from their fraudulent scheme — $1.2 million which was paid to them for their stock newsletter / software (Daytradingrobot.com and Doublingstocks.com) and $1.865 million in payments from various parties to promote stocks. And the amounts of money mentioned in the SEC’s lawsuit only include a couple of the pump and dumps that the Hunter twins ran.

Under today’s announced settlement, the Hunter brothers, without admitting or denying the allegations in the Commission’s complaint, consented to the entry of a judgment requiring Alex Hunter to pay a $100,000 penalty, requiring Tom Hunter to pay a $75,000 penalty, and enjoining both brothers individually from future violations of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder.

 

Disclaimer: I have no position in any stock 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 Gets aggressive with trading suspension of Endeavor Power Corp (EDVP) on second day of pump

With its second suspension of trading in an active stock promotion this month (the prior suspension was of SUSA), it looks like the SEC is finally getting serious about companies that issue inaccurate press releases to coincide with their stock promotion. Endeavor Power Corp (EDVP) was suspended today prior to the market open.

SEC suspension notice (pdf)
SEC suspension order (pdf)

From the order:

It appears to the Securities and Exchange Commission that there is a lack of current and accurate information concerning the securities of Endeavor Power Corp. (“Endeavor Power”), quoted under the ticker symbol EDVP, because of questions regarding the accuracy of assertions in Endeavor Power’s public filings and press releases relating to, among other things, patents.

The Commission is of the opinion that the public interest and the protection of investors require a suspension of trading in the securities of the above-listed company.

Endeavor Power had been promoted yesterday (technically, after the market close on 3/6/2013) and had 1,486,475 shares trade that day. See one of the promotion emails online. It was promoted by Andalusion Holding Co. websites (which now appear to be violating CANSPAM by no longer including a legal name and address at the bottom of their emails):

Please be advised by Serious Penny Stock has been compensated fifty five thousand dollars for this email alert

The Andalusion Holding Co. websites are as follows:

PennyStocksVIP.com
MonsterTradingAlerts.com
FreeOTCpicks.com
StockReports.net
SeriousPennyStock.com
WinningStockAlerts.com
PennyStocksGuru.net

Endeavor Power previously had been promoted on January 9th by Blue Wave Advisors LLC and a couple other promoters:

BlueWave Advisors LLC has been compensated seven thousand five hundred dollars from Bulls in Advantage LLC for EDVP marketing and promotional services.

There is also currently a landing page online at http://www.edvpreport.com/ that dicloses a $230,000 budget to promote Endeavor Power Corp. See an archived PDF copy of that page.

Investor Alley Inc. expects to be compensated two hundred thirty thousand dollars for the creation of this promotional effort of EDVP. Affiliates, managers, employees, and third parties of Investor Alley Inc. may have shares of EDVP and may liquidate, which will negatively affect the share price of EDVP.

Disclaimer: I have no position in any stock mentioned. 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.