SEC bans jailed promoter D'Amaro
2012-01-26 12:46 ET - Street Wire
Also Street Wire (U-*SEC) U.S. Securities and Exchange Commission
Also Street Wire (U-AAGH) Asia Global Holdings Corp
Also Street Wire (U-GHTI) GH3 International Inc
Also Street Wire (U-PLYCF) Playstar Corp
by Mike Caswell
The U.S. Securities and Exchange Commission has permanently banned Florida stock promoter Gerard D'Amaro from penny stocks for his role in the pump-and-dump of Playstar Corp., an Ontario pink sheets listing. The SEC claimed that he and a Polish citizen, Pawel Dynkowski, inflated the stock from under a penny to 12 cents with wash trades and misleading news, and then dumped $1.18-million worth of stock. (All figures are in U.S. dollars.)
Mr. D'Amaro, who is already serving a three-year sentence in a Miami jail for the scheme, agreed to the ban and to a $217,903 disgorgement order to settle the case. While he did not admit to any wrongdoing in settling, he pleaded guilty to parallel criminal charges in March, 2010.
The charges stemmed from a two-year investigation into a ring of promoters that used the Investors Hub website. The SEC claimed that the men manipulated four pink sheets listings, including Playstar, and dumped $6.2-million worth of stock. Those jailed included former Investors Hub operator Matthew Brown, who is serving four years after pleading guilty to criminal securities fraud charges in February, 2010.
SEC's complaint
The SEC's allegations against Mr. D'Amaro are contained in a civil complaint that the regulator filed against him and others on May 20, 2009, in the District of Delaware. According to the complaint, he was part of a "ring of serial penny stock manipulators" that dumped millions of shares in companies that the ring manipulated in 2006 and 2007. In addition to Playstar, the stocks were GH3 International Inc., Asia Global Holdings Inc. and Xtreme Motorsports of California Inc.
The Playstar scheme, as described in the complaint, began in late 2006, when the company issued 39.6 million free-trading shares to two accounts that Mr. D'Amaro and Mr. Dynkowski used. (Although the circumstances of the issuance are not clear, the SEC did not accuse anybody at Playstar of any wrongdoing.) The SEC said that Mr. Dynkowski executed wash trades that generated millions of shares in volume while Mr. D'Amaro had the company issue misleading news releases.
The net effect was to boost the stock to 12 cents, from the 0.5 cent it traded at in October, 2006. During the same period, Mr. Dynkowski sold 39 million Playstar shares, generating a $1.18-million profit, the complaint stated. Mr. Dynkowski and Mr. D'Amaro divided this money among themselves and unnamed individuals at Playstar.
One of the news releases the company issued during the selling was designed to mislead shareholders into believing that naked short-sellers were responsible for the massive volumes, the SEC claimed. The company said it had requested a list of non-objecting beneficial owners from its transfer agent. "In reality, the alleged naked short selling was actually Dynkowski dumping the shares he had received from Playstar," the complaint read. Playstar, which claimed to be developing a proprietary text messaging system, has since become defunct, and was last at 0.01 cent.
The largest of the pump-and-dumps, according to the complaint, was that of Asia Global Holdings, which purported to have the rights to the show "Who Wants to be a Millionaire" in China. The SEC said that Mr. Dynkowski and Mr. Brown dumped $4.05-million worth of stock in August, 2006, while they manipulated the company with wash trades and misleading news. During the selling, they had the company issue a news release touting purportedly positive financial results. "Dynkowski told Brown to 'make it sound good ... like AAGH [Asia Global] announces record revenue net profits [sic]' and suggested that the press release state that the company's profits had increased by at least 300%," the complaint stated. The company then issued a news release claiming that its second quarter net income had risen by 370 per cent. During the manipulation, the stock went from 11.5 cents to a 41-cent high on Aug. 25, 2006. (It was last at 0.12 cent.)
The other two pump-and-dumps described in the complaint followed similar patterns. The SEC sought disgorgement of profits and penny stock bans.
Much of the evidence in the case arose after police intercepted a large interstate money transfer, in which Mr. Brown had paid a driver to take $146,00 in cash from California to Delaware. Documents in a related asset forfeiture case stated that the driver, who knew Mr. Brown from high school, was to deliver the cash to Mr. Dynkowski. The delivery went awry when a Texas police officer stopped the car and discovered the cash. Instead of immediately detaining the driver, police had him deliver the money to Mr. Dynkowski's home in Delaware, which they then searched and discovered evidence of the market manipulations.
The strongest criminal penalty so far has gone to Mr. Brown who, in addition to four years in jail, is subject to a $4.78-million criminal forfeiture order (which he called a "financial death sentence" in court filings). Mr. D'Amaro, who is scheduled for release from Miami FCI on Nov. 14, 2012, received a $1.49-million criminal forfeiture order. U.S. authorities have yet to arrest Mr. Dynkowski, who remains a fugitive. |
