The Securities and Exchange Commission (SEC) has charged 16 defendants for participating in fraudulent penny stock schemes that generated more than $194 million in illicit proceeds.
The defendants were based in various countries, including the Bahamas, the British Virgin Islands, Bulgaria, Canada, the Cayman Islands, Monaco, Spain, Turkey, and the United Kingdom. There were 15 individuals and one company, Antevorta Capital Partners.
“We allege that the defendants in these actions orchestrated some of the most complex microcap stock fraud schemes ever charged by the SEC,” Gurbir Grewal, director of the SEC’s Division of Enforcement, said. “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.”
The complaints, filed in the United States District Court for the Southern District of New York, charge all of the defendants with violating the antifraud and registration provisions of the federal securities laws. The charges allege that several defendants played a variety of roles to accumulate the majority of shares in penny stocks via difficult-to-unveil, offshore nominee companies. It is also alleged that some of the defendants frequently used encrypted text and phone applications to avoid detection by regulators. They also arranged to buy and sell penny stocks from multiple offshore accounts in furtherance of the fraud.
The complaints contend that some of the defendants amassed a significant majority of the shares of the stocks. It also found that certain defendants secretly funded promotional campaigns to promote the stocks to unsuspecting investors in the United States and elsewhere. As alleged, when those campaigns triggered increases in the demand for and price of the stocks, some of the defendants sold the stocks via trading platforms in Asia, Europe, and the Caribbean for significant profits.
The SEC is seeking permanent injunctions, disgorgement of allegedly ill-gotten gains plus interest, and civil penalties against all the defendants; penny stock bars against all the individual defendants; injunctions against 11 of the 15 individual defendants; and officer and director bars against eight of the individual defendants.