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Microcap & Penny Stocks : Scambusters -- Ignore unavailable to you. Want to Upgrade?

To: Arcane Lore who wrote (156)	9/24/1998 6:04:00 PM
From: Link Lady	Respond to of 178

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 ..."

To: Arcane Lore who wrote (156)	10/23/1998 10:21:00 PM
From: Arcane Lore	Read Replies (2) \| Respond to of 178

Taking Stock Oracle-Based Knowledge System Helps Detect Securities Fraud By Michael Miley ...Assisting NASD Regulation in investigating market violations is a surveillance tool called the Advanced Detection System (ADS), a set of knowledge-discovery and data-mining tools developed with the help of Oracle partner SRA International (www.sra.com), in cooperation with Sequent Computer Systems (www.sequent.com), and Oracle Corporation. ADS helps analysts detect "breaks" in normal trading patterns. ... "ADS is a pattern-matching application, with specific templates, if you will, of what a violation might look like," explains Ted Senator, manager of the KDD Group. "An if/then rule matcher searches for multiples of a set of conditions--such as many instances of a particular kind of activity--and a time-sequence matcher looks for a triggering event. Based on that event, the sequence matcher looks for other related events and sequences--either forward or backward in time--that indicate that a particular violation may have occurred." For example, specific types of transaction patterns between brokerage firms and their customers could indicate that investors did not get the best prices possible. In addition, data-mining algorithms are used to help discover previously unencountered patterns of potential regulatory interest, such as a large number of trades marked late. Detecting Patterns ADS currently comprises three domains, or applications--Late Trade Reporting, Market Integrity, and Best Execution--with five to ten detection patterns for each. These applications are applied weekly to the accumulated data, after which the breaks are presented to analysts for review via a system of notifications and alerts. While the majority of the breaks do not indicate any violation, some alerts do lead to further investigation. "A late-trade violation, for example, would involve marking a trade late when it, in fact, is not," explains Senator. "A market-integrity violation might be a coordinated attempt to keep the price of a security at a certain level. A violation of the best-execution rules might involve a trade in which a customer who is selling receives a price less than what somebody else was willing to pay at the time of the sale." Market-regulation analysts review all breaks generated by the system. After the break is reviewed to see if a violation has in fact occurred, it's either closed out, an investigation is initiated, or other appropriate sanctions are imposed. ... oramag.com