SEC charges 5 individuals for $58 million scheme with penny stocks

Rick Steves

The SEC states defendants were paid approximately $10 million for promoting thinly traded stocks, which they misled investors to believe had high prospects for success.

The Securities and Exchange Commission has charged five individuals for allegedly operating a call center in Medellin, Colombia.

The SEC announced charges against U.S. citizen Chester Alvarez, Canadian citizens Francis Biller, Raymond Dove, and Troy Gran-Brooks, and Dutch citizen Justin Plaizier.

Using high-pressure sales tactics and making false and misleading statements, the five individuals convinced retail investors to buy stocks of small companies trading in the U.S. markets, also konwn as penny stocks.

Pump-and-dump scheme generated over $58 million

The charged individuals set up as phony investment management firms, with fake names, websites, and phone numbers, according to the financial watchdog, which added that the defendants orchestrated a pump-and-dump scheme and made false and misleading statements when they promoted the stock of at least 18 issuers and that they generated more than $58 million in trading from this scheme.

Defendants were paid approximately $10 million for promoting thinly traded stocks, which they misled investors to believe had high prospects for success, the order stated.

Paul Levenson, Director of the SEC’s Boston Regional Office, said: “These scam artists went to great lengths – using bogus companies, aliases, and spoofing their phone numbers – to defraud and mislead investors into a pump-and-dump scheme. We urge investors to read the investor education materials about fraud in the ‘penny stock’ market, which are available at Investor.gov.”

SEC goes after AVG for misleading marketing

The SEC has most recently gone after venture capital fund adviser Alumni Ventures Group (AVG) for alleged misleading statements about its management fees as well as inter-fund transactions in breach of fund operating agreements. Michael Collins, Chief Executive Officer at AVG, was charged with causing AVG’s violations.

AVG settled charges by repaying $4.7 million to affected funds and agreed to pay a $700,000 penalty, whereas Collins agreed to pay a $100,000 penalty, according to the announcement.

AVG’s website and other marketing communications said the management fee for its venture capital funds was the “industry standard ‘2 and 20.’”

This was found to be misleading because AVG led some investors to believe that AVG would collect a two-percent management fee during each year of its funds’ 10-year term, and separately collect a 20-percent performance fee, the SEC said.

The financial watchdog added that AVG’s typical practice was instead to assess management fees totaling 20 percent of an investor’s fund investment (representing ten years’ of two-percent annual management fees) upon the investor’s initial fund investment.

Read this next

Digital Assets

BlackRock digs further into crypto with metaverse ETF

BlackRock, the world’s largest asset manager with almost $10 trillion in AUM, is set to launch a new metaverse ETF to help investors securely monetize on the booming immersive version of the internet.

Digital Assets

Binance wins license in New Zealand as rival Huobi shutters derivatives

Binance, the world’s largest crypto exchange by traded volume, has obtained licenses to operate in New Zealand, even after rival Huobi shutdown derivatives trading last month due to concerns about regulations.

Retail FX

Hong Kong busts perpetrators of ‘ramp and dump’ scam

Hong Kong’s financial watchdog, the Securities and Futures Commission (SFC), has charged thirteen suspects of market manipulation in a joint operation with the local police.

Institutional FX

TradingView integrates market data from German Tradegate exchange

TradingView announced that it ‎has increased data coverage to allow its users to receive information from ‎and get free access to the intra-day and tick data from Tradegate Exchange.

Retail FX

Spotware Systems introduces Custom Push Notifications for cTrader mobile apps

Spotware Systems, a technology provider for the electronic trading industry, is introducing a new push notification feature to alert mobile users of price swings and market fluctuations through their cTrader app.

Market News

The Week Ahead: 30 September from David Madden, Market Analyst at Equiti Group

Sterling dominated the headlines last week, as there were concerns the UK government might struggle to service its debt.

Inside View

How does the quality of signal providers affect your business?

A must-have onboarding process for brokers with investment services like PAMM, MAM, or copy trading

Technology

DBS deploys Nasdaq Trade Surveillance

“The confidence that markets and our clients have in DBS as a safe and trusted banking group is anchored on our ability to detect and respond to anomalous activity, which in turn calls for a robust surveillance and prevention infrastructure.”

Industry News

SEC charges Justin Costello and David Ferraro for securities fraud and posing as billionaire veteran

The Securities and Exchange Commission charged Cannabis executive Justin Costello and David Ferraro, an associate of Costello’s, for promoting the stock of several microcap companies on social media without disclosing their own simultaneous stock sales as market prices rose.

<