rfrankowski

The SEC charged 15 individuals and 19 entities as defendants in a case involving multiple schemes to manipulate microcap stocks. The defendants were comprised of six firms, several customers, stock promotors, and two microcap issuers.  Some defendants acted as broker-dealers for customers who wanted to conceal their stock ownership and artificially inflate the market for microcap securities to make a wrongful profit.  The 34 defendants were charged with fraud, manipulative trading, touting, and registration violations.  Nine defendants were also criminally charged in parallel cases. Moneyline Brokers, a firm in Costa Rica, and its founder Bailey Gallison II, allegedly helped customers in “pump and dump” manipulation schemes by accepting transfers from the customers and reissuing the stocks in the firm’s name, which artificially inflates the stock price.  Then, the firm sells its own shares for a profit after the stock value wrongfully rises. Carl Kruse Sr. and Carl Kruse Jr. collaborated with Moneyline Brokers and other firms to increase stock prices [...]

Merrill Lynch was charged with using stale data when executing short sale orders.  Merrill Lynch agreed to settle the case by admitting their current system was improper, paying almost $11 million and retaining a consultant to review compliance procedures. Merrill Lynch and other firms prepare easy-to-borrow (ETB) lists that comprise of stocks that the firms have determined are readily available to grant locates.  ETB lists are created for the routine occasions that customers ask their brokers to lawfully “locate” stock for short selling.  Merrill Lynch’s system of creating these lists involves checking the availability of securities one time every day.  The lists are then prepared daily and are relevant for one day.  However, some securities that Merrill Lynch deemed accessible become no longer easily available during the course of the day, but stay on the ETB list until the next business day. When Merrill Lynch discovered this glitch in 2012, personnel discontinued use of the ETB list when certain shares [...]

The SEC called for an emergency asset freeze on two accounts, which hold assets of approximately $2 million.  The brokerage accounts hold ill-gotten proceeds from a fraudulent EDGAR filing. The SEC tracked an EDGAR system filing in May 2015 about a fraudulent Avon tender offer to a foreign company in Bulgaria.  Nedko Nedev, a Bulgarian trader, managed at least one of the two frozen accounts.  His account held a significant amount of Avon contracts-for-difference (CFDs) that were declining in value.  Avon CFDs spiked 20 percent after the EDGAR filing was made.  Nedev sold almost half of his Avon CFDs during the temporary rise in value, creating about $5,000 in ill-gotten profits. The SEC charges Nedev as a defendant in this case as well as Strategic Capital Partners Muster Ltd., Strategic Wealth Investments Inc., PTG Capital Partners LTC, and PST Capital Group LTD.  All defendants were charged for contributing to the manipulation of Avon stocks.  This Avon scheme was conducted in [...]

Computer Sciences Corporation and eight former executives were charged with manipulating financial reports and covering up substantial issues about the company’s prestigious, multi-billion dollar contract with the United Kingdom’s National Health Service (NHS). CSC’s accounting and disclosure fraud started when the company discovered it was unable to meet specific deadlines, which would result in lost profits.  To mask the lost earnings to its shareholders, Sutcliffe, CSC’s finance director overseeing the contract with NHS, added fictitious items to CSC’s accounting models that showed increased profits but did not produce profits in reality. Laphen, another CSC executive, then approved CSC to continue to hide its losses by basing CSC’s accounting models on unofficial amendments instead of the existing contract.  NHS had repeatedly denied CSC’s proposed amendments to charge more money for less work.  However, CSC based its models on the unapproved amendments to avoid publicizing its inevitably reduced earnings. Two officers, Laphen and Mancuso, failed to disclose the reduction in earnings to [...]