The Securities and Exchange Commission today charged a pair of penny stock promoters in Canada with manipulating two microcap stocks to create the false appearance of market interest.
The SEC alleges that Mike Taxon and Itamar Cohen distributed promotional mailings of glossy “newsletters” with fake publication names like “Stock Trend Report” and “Global Investor Watch” in order to tout the stocks of purported gold and silver exploration company Raven Gold Corporation (RVNG) and natural gas production company Kentucky USA Energy (KYUS). The newsletters misled investors with purportedly positive – but fake – price and volume trends for these stocks and other false information about the promoters’ identity, compensation, and control of the stock. In reality, most of the touted market activity was generated by Taxon, Cohen, and their associates who controlled large blocks of the companies’ stocks. Earlier this week, the SEC charged attorney Adam Gottbetter for his role in the scheme involving Kentucky USA Energy stock.
In a parallel action, the U.S. Attorney’s Office for the District of New Jersey today announced criminal charges against Taxon and Cohen.
“Taxon and Cohen lured investors to these stocks by depicting the illusion of an active market and positive market trends,” said Andrew M. Calamari, Director of the SEC’s New York Regional Office.
The SEC’s complaint filed in federal court in New Jersey alleges that Taxon and Cohen violated Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933, and violated and aided and abetted violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5.
Taxon and Cohen agreed to partial settlements of the SEC’s charges, with monetary sanctions to be determined by the court at a later date. They consented to the entry of a judgment enjoining them from future violations and barring them from participating in penny stock offerings. The partial settlements are subject to court approval.
The SEC’s investigation has been conducted by Simona Suh of the Market Abuse Unit and Nancy A. Brown and Elzbieta Wraga of the New York office. The case is being supervised by Amelia A. Cottrell and Michael J. Osnato Jr. The SEC appreciates the assistance of the Newark Field Office of the Federal Bureau of Investigation, the U.S. Attorney’s Office for the District of New Jersey, and the Financial Industry Regulatory Authority.