Fraudulent News Letters Used In Pump-and-Dump Schemes – Boca Raton, Florida Investment and Penny Stock Litigation Attorney
SEC Charges Three Penny Stock Promoters Behind Pump-and-Dump Schemes
The Securities and Exchange Commission recently charged three penny stock promoters with conducting pump-and-dump schemes involving stocks they were touting in their supposedly independent newsletters.
The SEC alleges that Anthony Thompson, Jay Fung, and Eric Van Nguyen worked in coordinated fashion to gain control of a large portion of shares in the stock of microcap companies and then hyped those stocks in newsletters they distributed to prospective investors. After creating demand for the stock and increasing the value, they sold their holdings at the higher prices and earned significant profits. Once they stopped their promotional efforts, the demand for the stocks subsided and the prices dropped, leaving investors who had purchased the promoters’ shares with significant losses.
According to the SEC’s complaint filed in federal court in Manhattan, the newsletters published by Thompson, Fung, and Van Nguyen misleadingly stated that they “may” or “might” sell shares they owned when in reality their intentions always were to sell the stocks they were promoting. In fact, in some instances they already were selling the stocks to which they were saying “may” or “might” sell. They also failed to fully disclose in their newsletters the amounts of compensation they were receiving for promoting the stocks, cloaking the fact that they were coordinating their promotion of the penny stocks to deliberately increase the prices and dump their own shares.
According to the SEC’s complaint, the three promoters conducted five separate schemes that resulted in more than $10 million in ill-gotten gains. The penny stocks they manipulated were Blast Applications Inc., Smart Holdings Inc., Blue Gem Enterprise Inc., Lyric Jeans Inc., and Mass Hysteria Entertainment Company Inc. Thompson, who lives in Bethesda, Md., distributed several electronic penny stock promotion newsletters with such names as FreeInvestmentReport.com and OxofWallStreet.com. Fung, who resides in Delray Beach, Fla., distributed his newsletters at such websites as PennyPic.com, and Van Nguyen was typically based in Canada and distributed electronic penny stock promotion newsletters on such websites as UnrealStocks.com and InsanePicks.com.
The SEC’s complaint names two relief defendants for the purposes of recovering money in their possession that resulted from the schemes. Thompson’s wife Kendall Thompson received $200,000 in proceeds from one of the stock manipulation schemes. John Babikian, who operated a penny stock promotion business primarily from a website named AwesomePennyStocks.com, received $1 million as a result of one of the schemes. In a separate SEC case involving a different scheme, a court ordered $3.73 million in sanctions against Babikian.
The SEC’s complaint charges Thompson, Fung, and Van Nguyen with violating the antifraud and anti-touting provisions of the federal securities laws and related rules. The SEC is seeking disgorgement of ill-gotten gains from the schemes plus prejudgment interest and penalties as well as permanent injunctions against further violations of the securities laws.
Thompson and Fung also were named in a separate SEC case for their roles in a Florida-based scheme in which they promoted a penny stock in their newsletters without adequately disclosing they were selling their shares in the same stock and receiving compensation for their promotional efforts. A court issued a final judgment requiring them to pay more than $1 million combined.