Securities and Exchange Commission v. Falcon Ridge Development, Inc., et al., Civil Action No. 13-cv-1101 (E.D. Pa.)


The Securities and Exchange Commission recently announced that it charged Falcon Ridge Development, Inc. (“Falcon Ridge”) and its President and CEO, Fred M. Montano, of Albuquerque, New Mexico, with engaging in a fraudulent scheme to manipulate the market for Falcon Ridge’s common stock. Falcon Ridge is a New Mexico real estate company, headquartered in Albuquerque. The United States Attorney for the Eastern District of Pennsylvania separately announced criminal charges involving the same conduct.

The Commission’s action, filed in federal district court in Philadelphia, alleges that, from at least August through November 2008, Montano, who claimed to control Falcon Ridge’s common stock, arranged with an individual (the “Cooperator”) he believed had connections to corrupt registered representatives to generate purchases of the company’s stock in exchange for cash kickbacks. In reality, the Cooperator was, at all times, secretly cooperating with the FBI. The Commission alleges that, in furtherance of the scheme, Montano paid $1,000 to orchestrate the purchase of 625,000 shares of Falcon Ridge common stock by the Cooperator, in part, through a matched trade designed by Montano to ensure that he received proceeds from the purchases. In addition, Montano shared nonpublic news releases and a confidential shareholder list with the Cooperator, and coordinated the release of news with the illegal purchases in the stock.

The complaint further alleges that Montano engaged in several telephone conversations with the Cooperator in which Montano described his intent and confirmed his involvement in the manipulation. Through these activities, Montano created artificial trading activity, injected artificial information into the marketplace, and created a false impression of supply and demand for Falcon Ridge’s stock.

The complaint alleges violations of Section 17(a)(1) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder against Falcon Ridge and Montano. The complaint seeks permanent injunctions, disgorgement of ill-gotten gains, together with prejudgment interest, and civil penalties against both defendants, and penny stock and officer and director bars against Montano.

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