STOCK PRICE SPIKE INDICATED STOCK RISE SCAM ACCORDING TO SEC

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION 

07/31/2015 04:30 PM EDT

The Securities and Exchange Commission charged a Canadian citizen with conducting a scheme to conceal his control and ownership of a microcap company whose price quickly spiked last year.  The SEC suspended trading in the stock, Cynk Technology Corp., before the alleged schemer, Phillip Thomas Kueber, could profit on the gains from the stock’s rise to more than $21 from less than 10 cents per share.

The SEC alleges that Kueber was behind a false and misleading registration statement filed by Cynk and enlisted a small group of straw shareholders and sham CEOs to conceal his control of purportedly non-restricted shares in Cynk stock.  The complaint alleges that the straw shareholders – mainly Kuber’s family members and associates in British Columbia and California – never received the shares they “purchased.”  Kueber allegedly transferred the shares to brokerage accounts and offshore shell companies he secretly controlled and misled broker-dealers about his ownership of the shares to create the false appearance of a company with publicly held shares.

According to the SEC’s complaint filed in U.S. District Court for the Eastern District of New York, Kueber was unable to cash in on selling his Cynk shares when the SEC suspended trading in Cynk on July 11, 2014 amid suspicious activity surrounding the company’s stock.  Once trading resumed, the share price fell, closing at 60 cents per share on July 28, 2014.

“We allege that Kueber used straw shareholders, offshore dummy corporations, and puppet corporate officers to gain and conceal control over the majority of Cynk shares,” said Michael Paley, Co-Chair of the SEC Enforcement Division’s Microcap Fraud Task Force.  “Law enforcement has again pierced through the layers of deceit to hold an alleged wrongdoer accountable, in this case before he could liquidate his shares in the open market and realize ill-gotten profits.”

The SEC’s complaint alleges that Kueber violated the antifraud provisions of federal securities laws and related SEC antifraud rules.  The SEC is seeking to impose a civil monetary penalty, to bar Kueber from serving as a public company officer or director or participating in a penny-stock offer, and to be subject to a court-ordered injunction against future antifraud violations.

The SEC’s continuing investigation has been conducted by Joshua R. Geller, Joseph G. Darragh, and Michael Paley of the Microcap Fraud Task Force along with Wendy Tepperman of the New York office.  The litigation will be conducted by Preethi Krishnamurthy and Mr. Geller.  The case is being supervised by Sanjay Wadhwa.  The SEC appreciates the assistance of the U.S. Attorney’s Office for the Eastern District of New York, Federal Bureau of Investigation, Internal Revenue Service, Department of Homeland Security, and Financial Industry Regulatory Authority.

DAY-TRADER CHARGED FOR ROLE IN MANIPULATION STOCK PRICES TO OBTAIN NASDAQ LISTING

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 23224 / March 27, 2015

Securities and Exchange Commission v. Michael J. Ling, Civil Action No. 15-cv-02179

SEC Charges Day-Trader with Manipulating Stock Prices in Order to Obtain NASDAQ Listing for Company

The Securities and Exchange Commission today announced charges against a New Jersey-based day-trader who allegedly manipulated the securities of a microcap company in order to drive-up and maintain the company's stock price above the minimum price required for listing on a national exchange. According to the SEC, apart from helping the company get listed on the exchange, the day-trader also profited from his scheme by more than $650,000.

The SEC alleges that Michael J. Ling repeatedly engaged in marking-the-close trades and entered into matched trades in shares of Cyberdefender Corp., a now-defunct computer software company, in order to maintain the price of the microcap company at or above $4.00 per share over the period September 2009 through June 2010. Maintaining a closing bid price at $4.00 per share or higher for 90 consecutive trading days prior to application was a prerequisite for listing on the Nasdaq Capital Market. Marking-the-close is the practice of attempting to influence the closing price of a stock by executing orders at or near the close of the market. A matched trade occurs when an order for the purchase (or sale) of a security is entered with the knowledge that a substantially similar order for the sale (or purchase) of the security has been or will be entered.

According to the SEC's complaint filed in the U.S. District Court for the District of New Jersey, over a period of 144 trading days, Ling traded in Cyberdefender Corp. stock on 127 days, and on 54 of those 127 days, Ling traded in the final fifteen minutes of the trading day. Further, Ling was the last trade of the day, and thus set the closing price, on 48 days. Ling also engaged in 23 matched trades that were coordinated with an acquaintance.

The Commission alleges that Ling profited from his scheme by more than $650,000, mainly by exercising warrants he received at bargain prices. After the manipulation concluded, Cyberdefender's share price slowly fell, leaving unsuspecting shareholders who purchased at elevated prices with a loss.

The SEC's complaint alleges that Ling violated Sections 17(a)(1) and 17(a)(3) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rules 10b-5(a) and 10b-5(c) thereunder.

The Commission's investigation has been conducted by William Finkel, and Thomas P. Smith, Jr. of the New York Regional Office, with assistance from Joseph Darragh of the Commission's Microcap Fraud Task Force. The litigation will be led by David Stoelting. The case is being supervised by Sanjay Wadhwa.

SEC ANNOUNCES FRAUD CHARGES AGAINST ALLEGED "RECIDIVIST" VIOLATORS

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION 

The Securities and Exchange Commission  announced fraud charges against four individuals and a microcap company for concealing from investors that two lawbreakers ran the company.

According to the SEC’s orders instituting administrative proceedings, the mission of Natural Blue Resources Inc. was to create, acquire, or otherwise invest in environmentally-friendly companies, including an initiative to locate, purify, and sell water recovered from underground aquifers in New Mexico and other areas with depleting water resources.  What investors didn’t know was that two individuals with prior law violations – James E. Cohen and Joseph Corazzi – secretly controlled the operational and management decisions of Natural Blue while calling themselves outside “consultants.”  This arrangement enabled them to be de facto officers of Natural Blue and personally profit from the company without disclosing their past brushes with the law to investors.  Cohen, who lives in Windermere, Fla., was previously incarcerated for financial fraud.  Corazzi, who resides in Albuquerque, N.M., was previously charged with violating federal securities laws and permanently barred from acting as an officer or director of a public company. 

“Cohen and Corazzi concealed their involvement through a so-called ‘consulting’ agreement, but their influence over the issuer spread much further,” said Andrew J. Ceresney, director of the SEC’s Enforcement Division.  “Investors in Natural Blue had a right to know who was running the company behind the scenes.”

The SEC has suspended trading in Natural Blue stock.  The other two individuals charged in the case are Toney Anaya and Erik Perry, who were former chief executive officers at Natural Blue.  The SEC’s orders find that they misled investors by failing to disclose that Cohen and Corazzi were running the company in spite of their criminal or disciplinary histories.

Anaya, who is a former New Mexico governor and attorney general, and Perry each agreed to settle the charges.  Anaya has cooperated extensively with the SEC’s investigation.

“Preventing past law violators from raising money in our markets is critical to preserving investor confidence,” said Paul Levenson, director of the SEC’s Boston Regional Office.  “Natural Blue and its officers attempted an end-run around the rules designed to prevent recidivists from getting their hands on the controls of public companies.”

According to the SEC’s orders, Cohen and Corazzi created Natural Blue so they and other entities they controlled could receive money and stock from the company and profit by hundreds of thousands of dollars.  While Natural Blue was ostensibly led by Anaya and subsequently Perry, management decisions made by Cohen and Corazzi resulted in no revenues or viable business operations for the company.  Anaya and Perry each deferred to Cohen and Corazzi in derogation of their responsibilities.  Natural Blue and Perry also made various material misrepresentations about the company, its contracts, and its anticipated revenue in a February 2011 press release as well as on a website and verbally to investors.

Anaya, who served as Natural Blue’s CEO from August 2009 to January 2011, has signed a cooperation agreement with the SEC in which he has consented to the entry of a cease-and-desist order without admitting or denying the charges.  He will be barred from participating in any offering of a penny stock for at least five years.  Any financial penalties will be determined at a later date.

Perry, who replaced Anaya and served as CEO until June 2011, agreed to settle the case by consenting to the entry of a cease-and-desist order without admitting or denying the charges.  Perry, who previously resided in Massachusetts and currently lives in Bulgaria, agreed to pay a $150,000 penalty and be permanently barred from serving as an officer or director of a public company and from participating in any offerings of penny stock. 

  

The SEC’s orders charge Natural Blue, Cohen, and Corazzi with violations of Section 17(a)(1) and (a)(3) of the Securities Act of 1933 as well as Section 10(b) of the Securities Exchange Act of 1934 and Rules 10b-5(a) and 10b-5(c).  The orders also charge Natural Blue with violations of Section 17(a)(2) for misrepresentations made to investors in press releases and public filings, and violations of Section 15(d) of the Exchange Act and Rules 15d-1 and 15d-13 by failing to make required SEC filings.

The SEC’s investigation was conducted by Thomas Rappaport, Amy Gwiazda, Sofia Hussain, and Rua Kelly in the Boston Regional Office.  Rua Kelly and Mayeti Gametchu will handle the litigation.  The SEC appreciates the assistance of the Federal Bureau of Investigation.

SEC ANNOUNCES $1.5 MILLION IN DISGORGEMENT, PENALTIES FROM INVESTMENT ADVISER AND OWNER

FROM:  SECURITIES AND EXCHANGE COMMISSION 

SEC Obtains an Officer and Director Bar and Over $1.5 Million in Disgorgement and Penalties from Chicago Area Investment Adviser and Its Owner for Fraud

The United States Securities and Exchange Commission (Commission) announced today that on July 14, 2014, Judge Charles P. Kocoras of the United States District Court for the Northern District of Illinois entered a judgment imposing $715,700 in disgorgement plus prejudgment interest of $166,476 against Oakbrook, Illinois resident Patrick G. Rooney (Rooney) and his company Solaris Management, LLC (Solaris) and a $715,700 civil penalty against Rooney. Judge Kocoras also barred Rooney from operating a private investment fund and from serving as an officer or director of any public company, expect for Positron Corporation (Positron), for which Rooney currently serves as Chief Executive Officer and Chairman of the Board.

According to the SEC's complaint filed on November 16, 2011, Rooney and Solaris radically changed the investment strategy of the Solaris Opportunity Fund LP (the Fund), contrary to the Fund's offering documents and marketing materials, by becoming wholly invested in Positron, a financially troubled microcap company. The SEC alleges that Rooney, who has been Chairman of Positron since 2004 and received salary and stock options from Positron since September 2005, misused the Fund's money by investing more than $3.6 million in Positron through both private transactions and market purchases. Many of the private transactions were undocumented while other investments were interest-free loans to Positron. Rooney and Solaris hid the Positron investments and Rooney's relationship with the company from the Fund's investors for over four years. Although Rooney finally told investors about the Positron investments in a March 2009 newsletter, the SEC's complaint alleges he falsely told them he became Chairman to safeguard the Fund's investments. These investments benefited Positron and Rooney while providing the Fund with a concentrated, undiversified, and illiquid position in a cash-poor company with a lengthy track record of losses.

On December 19, 2013, Judge Kocoras entered an order of permanent injunctions enjoining Rooney and Solaris Management from violating Sections 206(1), 206(2), and 206(4) of the Investment Advisers Act of 1940 and Rules 206(4)-8(a)(1) and (a)(2) thereunder; Section 17(a) of the Securities Act of 1933; and Sections 10(b) and 13(d)(1) of the Securities Exchange Act of 1934 and Rules 10b-5 and 13d-1 thereunder.

For additional information see Litigation Releases Number 22895 (Dec. 23, 2013) and 22167 (Nov. 22, 2011) and Press Release Number 2011-252 (Dec. 1, 2011).