canoe.com
FOCUS-SEC accuses 41 of microcap fraud
WASHINGTON (Reuters) - The U.S. Securities and Exchange Commission filed charges against 41 defendants Thursday,
alleging they participated in various scams, some using the Internet, involving cheap stocks known as microcaps.
Regulators said most of the 13 legal actions it filed featured so-called "pump-and-dump" scams where the price of
securities is manipulated upward.
In such schemes, a person will typically buy large amounts of a company's low-priced security, "pump" up the price by
hyping the security over the Internet or via the airwaves, and then "dump" it after a profit is made.
The alleged scams cheated investors out of more than $25 million, the SEC found.
The agency, which files about 50 microcap fraud cases a year, said the new cases showed important progress in its
continuing battle. It said the Internet has become a popular place for the scams to operate.
"The war against microcap fraud has been one of the commission's highest priorities over the last several years, and I
think today's actions mark important progress in that battle," Richard Walker, head of the SEC's enforcement division, told
reporters.
While a majority of the latest charges did not involve the Internet, Walker said: "I think increasingly we're seeing the
Internet playing a very important role in these sort of pump-and-dump-type of schemes. We've seen a lot of very close ties
between the use of the Internet and microcap fraud schemes."
Among the scams the SEC alleged:
-- A Florida company that claimed it built golf practice facilities was really a Ponzi scheme that cheated more than 350
investors in 16 states out of nearly $15 million.
A Ponzi scheme is a fraudulent pyramid-type financial structure that involves luring investors seeking high interest rate
returns and using the funds to pay off earlier investors.
-- Con artists in South Florida sold unregistered shares in bogus hotel renovation and condo projects when in fact they
printed the certificates themselves and kept the money when they sold them.
-- An Orange County, Calif., brokerage firm named Waldron & Co. Inc. and its former president, Cery Perle, racked up
more than $4 million by rigging the market for shares of Internet shopping service Shopping.com
(http://www.shopping.com) .
-- The stock of a Utah company named International Automated Systems soared from $3.50 to more than $40 per share
after it claimed it had developed a new data transmission technology. Prices collapsed when the company failed to
produce a promised prototype but not before the company's chairman and his children sold $3 million worth of their
shares.
The SEC discovered the alleged fraud from numerous places, including complaints received on its Web site
(http://www.sec.gov) as well as through the efforts of its market surveillance unit and inspection office.
In some of the cases, there is a parallel criminal indictment, and in many of them the SEC's investigation continues, the
commission's Walker said, adding: "Microcap fraud takes many forms and many evils ..."
|
