The Securities and Exchange Commission today charged a trio of alleged microcap stock scammers with defrauding investors by disseminating promotional e-mails exhorting readers to immediately buy purportedly hot stocks so they could secretly sell their own holdings at a substantial profit.
The SEC alleges that the three men, who live in Israel, obtained shares in several penny stock companies and pumped the prices as high as 1,800 percent before dumping the shares for at least $2.8 million in illicit proceeds. In one extravagantly positive promotional e-mail about a particular stock, they stated that a $5,000 investment could be worth more than $250,000 in two years. The men used numerous corporate identities and developed at least 20 different stock promotion websites to con investors into buying the stocks and causing the spikes in trading volume and share price that spurred their schemes.
The SEC’s complaint filed in federal court in Manhattan names Joshua Samuel Aaron (aka Mike Shields), Gery Shalon (aka Phillipe Mousset and Christopher Engeham), and Zvi Orenstein (aka Aviv Stein and John Avery). Aaron and Shalon allegedly wrote and designed the e-mails, Shalon allegedly disseminated them, and Orenstein allegedly provided essential operational support by handling brokerage accounts using numerous aliases.
In a parallel action, the U.S. Attorney’s Office for the Southern District of New York today announced criminal charges.
“These men allegedly manipulated the microcap market to make quick profits at the expense of unsuspecting investors, and they have been caught by law enforcement despite using aliases and other ploys in an attempt to cover their tracks,” said Andrew M. Calamari, Director of the SEC’s New York Regional Office.
The SEC’s complaint charges Aaron, Sharon, and Orenstein with violating or aiding and abetting violations of Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5. The SEC is seeking to bar them from the penny stock business and obtain their ill-gotten gains plus interest and financial penalties.
The SEC’s investigation has been conducted by Kristine Zaleskas, Tim Nealon, Leslie Kazon, and Michael Paley of the Microcap Fraud Task Force along with Judith Weinstock of the New York office. The litigation will be conducted by Paul Gizzi, Ms. Zaleskas, and Ms. Weinstock. The case is being supervised by Sanjay Wadhwa. The SEC appreciates the assistance of the U.S. Attorney’s Office for the Southern District of New York, the Federal Bureau of Investigation, and the Financial Industry Regulatory Authority.