The US Securities and Exchange Commission (SEC) announced on Monday that it filed charges against 16 defendants for participating in multi-year fraudulent penny stock schemes that generated more than $194 million in illicit proceeds.
According to the press release, the people allegedly involved in the pump and dump plots are based in the Bahamas, the British Virgin Islands, Bulgaria, Canada, the Cayman Islands, Monaco, Spain, Turkey and the United Kingdom.
According to the SEC's complaints filed in the United States District Court for the Southern District of New York, all defendants violated federal securities laws related to anti-fraud and registration. Several defendants are accused in separate complaints of playing a variety of roles in accumulating shares in penny stocks via offshore nominee companies that are difficult to uncover.
Scheme Background
Additionally, several defendants are alleged to have used encrypted text messages and phone applications in order to avoid detection by regulators and to purchase penny stocks from multiple offshore accounts to further the fraud.
"We allege that the defendants in these actions orchestrated some of the most complex microcap stock fraud schemes ever charged by the SEC. By locating their operations overseas, using encrypted messaging, and operating through a convoluted network of offshore accounts, the defendants hoped to avoid detection of the massive frauds we allege they perpetrated on US markets and investors. However, investigative teams from three SEC offices doggedly kept on their trail, working across borders, and ended this alleged global scheme,” Gurbir S. Grewal, the Director of the SEC’s Division of Enforcement, commented.
Some of the defendants, once some of them had accumulated a significant majority of the shares of the stocks, secretly funded promotional campaigns to market the stocks to unsuspecting investors in the United States and abroad, as alleged in the complaint. According to the allegations, when those campaigns triggered an increase in demand for and prices of the stocks, some defendants sold the stocks on trading platforms in Asia, Europe and the Caribbean to make significant profits.
