The Securities and Exchange Commission today charged the CEO of a sexual health products retailer and a paid promoter with orchestrating fraudulent promotional campaigns to tout the company’s stock.
The SEC alleges that Scott S. Fraser, who also was a major shareholder in Las Vegas-based Empowered Products Inc., separately ran a newsletter publishing business and hired Nathan Yeung to secretly help him promote Empowered Products through online newsletter articles purportedly authored by independent writers. But Fraser and Yeung actually authored, authorized, and distributed the rosy articles about Empowered Products themselves, working under such pseudonyms as “Charlie Buck” and then hiring other promoters to disseminate the promotions to their respective subscriber lists in exchange for fees. Meanwhile the promotions failed to disclose that Empowered Products and Fraser approved and paid for the advertisements.
“When promoters fail to disclose their relationship with a company they’re touting, they give investors a false impression that an investment recommendation is objective,” said Andrew M. Calamari, Director of the SEC’s New York Regional Office. “We allege that Fraser and Yeung deliberately touted Empowered Products without disclosing the company’s involvement with the promotions.”
The SEC’s complaint charges Fraser, his newsletter company Contrarian Press, and Yeung with violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 as well as Section 17(b) of the Securities Act of 1933. The complaint further charges Fraser with aiding and abetting violations by Contrarian Press, and seeks to hold him liable as a control person of the company. The complaint also charges Yeung with aiding and abetting violations by Fraser and Contrarian Press.
The SEC’s investigation was conducted by Tejal Shah, Alexander Janghorbani, Douglas Smith, and Sandeep Satwalekar of the New York office and Joseph Darragh of the Microcap Fraud Task Force. The case is being supervised by Lara Shalov Mehraban. The litigation will be led by Mr. Janghorbani and Ms. Shah.