The Securities and Exchange Commission today charged a penny stock promoter in Montana with orchestrating a fraudulent pump-and-dump scheme involving the stock of a Northern Virginia-based company that claims to be in the airport security business.
The SEC alleges that Matthew Carley, who lives in Bozeman, Mont., engineered a reverse merger and gained control of free-trading shares of Red Branch Technologies located in Ashburn, Va. Carley then orchestrated two blast e-mail campaigns promoting Red Branch stock, and he timed the e-mails to coincide with the dissemination of materially false and misleading company press releases touting technology related to airport security and homeland security. However as Carley well knew, Red Branch had no true business operations and no sales revenue. Once the promotional campaigns generated dramatic increases to Red Branch’s share price and trading volume, Carley immediately sold several million Red Branch shares for $789,478 in unlawful profits.
Carley agreed to settle the SEC’s charges and be barred from the penny stock industry.
“From behind the scenes, Carley took advantage of unwitting investors by funding and coordinating promotional hype for a company with no real revenues, and he cashed in by dumping his own shares once he created demand for the stock,” said Stephen L. Cohen, Associate Director of the SEC’s Division of Enforcement.
The SEC’s complaint, which was filed in U.S. District Court for the Eastern District of Virginia, alleges that Carley violated Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934, and Rule 10b-5.
A parallel criminal case against Carley was announced today by the U.S. Attorney’s Office for the Eastern District of Virginia.
The settlement with the SEC, subject to court approval, would bar Carley from participating in any future penny stock offering and permanently enjoin him from future violations of the antifraud provisions. He is liable for disgorgement and prejudgment interest of $921,232 that he is anticipated to pay as part of his obligations in the criminal case.
The SEC’s investigation, which is continuing, is being conducted by Christopher R. Mathews and supervised by J. Lee Buck II. The SEC appreciates the assistance of the U.S. Attorney’s Office for the Eastern District of Virginia, the Federal Bureau of Investigation, and the Financial Industry Regulatory Authority.