U.S. securities regulators Friday charged a group of Canadian stock promoters, along with a couple of U.S. lawyers, and a Bahamas-based broker-dealer, with carrying out an international ‘pump-and-dump’ scheme.
According to a complaint from the U.S. Securities and Exchange Commission (SEC), Canadian stock promoters, John Kirk, Benjamin Kirk, Dylan Boyle, James Hinton, and their associates, “used false and misleading promotions to pump up trading in the stock of the two microcap companies and made millions when they secretly dumped their own shares.”
The SEC alleges that the promoters sent investors false and misleading emails about two publicly traded U.S. companies, Pacific Blue Energy Corporation and Tradeshow Marketing Company Ltd., through two websites they controlled, Skymark Research and Emerging Stock Report; and, it says they used ‘boiler room’ sales calls to tout the stocks, falsely claiming that the recommendations were based on independent research by Skymark and Emerging Stock Report. It says they generated at least $11 million with the scheme.
The Alberta Securities Commission (ASC) filed charges in provincial court against the Kirks and Boyle in August 2011, alleging 10 counts of breaching Alberta securities laws with the ‘pump and dump’ scheme. The allegations have not been proven. A trial is slated for June.
ASC files charges in alleged ‘pump and dump’ scheme
On Friday, the SEC also charged two San Diego-based attorneys, Luis Carrillo and Wade Huettel, who it says were central participants in the scheme, “who helped the promoters conceal their ownership interests in the companies, drafted misleading public filings, and provided misleading legal opinions.” It claims their law firm, Carrillo Huettel LLP, secretly received proceeds of stock sales in the form of a sham loan.
The SEC also says Gibraltar Global Securities, a Bahamian broker-dealer, provided false affidavits and misleading statements that allowed Benjamin Kirk to secretly sell shares of the companies he was promoting. It claims Luniel de Beer, who was president of Tradeshow and chairman of Pacific Blue, also received more than $330,000 in kickbacks for his part in the scheme; and, it alleged that de Beer and Pacific Blue president, Joel Franklin, made misleading representations and facilitated the promoters’ stock sales.
Without admitting or denying the SEC’s allegations, Franklin agreed to settle the regulator’s charges and consented to certain injunctive relief. The allegations against the others have not been proven.
The SEC’s complaint, which was filed in a Manhattan federal court today, charges the Kirks, Boyle, Hinto, Carrillo Huettel, Carrillo Huettel LLP, Gibraltar Global Securities, de Beer, Franklin, Pacific Blue, and Tradeshow with violations of U.S. anti-fraud laws and rules, and for distributing unregistered shares, in violation of U.S. securities laws.
The SEC is seeking to have the defendants return their allegedly ill-gotten gains, with interest, and to bar them from participating in penny stock offerings and from serving as public company officers or directors. It is also seeking civil monetary penalties from the attorneys, their law firm, and from de Beer.
“Microcap fraud is a scourge on our markets and we will continue to aggressively pursue individuals who engage in it, whether they are unscrupulous stock promoters who prey on investors or unethical attorneys who enable these pernicious schemes. Moreover, as this action demonstrates, the SEC is working closely with foreign authorities to root out this conduct in the international arena,” said Andrew Calamari, director of the SEC’s New York regional office.
The SEC noted that both the ASC and the B.C. Securities Commission (BCSC) assisted the investigation, along with the Financial Industry Regulatory Authority, the Bahamas Securities Commission, the National Banking and Securities Commission of Mexico, and the Turks and Caicos Islands Financial Services Commission.