Feds Charge Stock Manipulators Who Stole $194 Million

The federal government has charged a fraud ring that manipulated numerous US stocks. The group netted $194 million in ill-gotten gains over several years.

From Compliance Week:

The SEC’s charges, contained in three separate complaints filed in the U.S. District Court for the Southern District of New York, allege that the defendants secretly held large, controlling positions in so-called “penny stocks” issued by microcap companies.

From 2013 through at least 2018, defendants’ goal was to secretly gain control of thinly traded microcap companies, hire stock promoters to generate demand for their shares, and then profit by selling those shares illegally to unsuspecting investors,” stated one SEC complaint.

The criminals hid behind a variety of shell companies and offshore accounts. They employed various schemes such as “painting the tape,” or trading shares between each other at inflated prices to make the stock seem more valuable then it was, according to the DOJ press release.

This is a common strategy. Once the price has risen artificially, the shares are then dumped on an unsuspecting bag holder who thinks he’s bought a “hot stock.”


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The defendants are charged with securities fraud, wire fraud, money laundering, and other charges. They could face up to 20 years in prison, per count.

The key point to remember is that this type of manipulation happens in securities markets every day. And it’s not confined to small stocks.

As investors, we have to be on the lookout for it.

And just as there are conspiracy to pump stocks, there are conspiracies to crash them.

Short selling hedge funds Melvin Capital and Citron Research are being investigated by the FBI for possibly conspiring with research firms to publish false reports on stocks. Sabrepoint Capital paid a researcher to publish false, negative information about Farmland Partners on Seeking Alpha, a recent court case uncovered.

Here are a few guidelines to avoid being caught up in these schemes:

1) Don’t believe everything you read.
2) Don’t buy a stock just because it’s going up.
3) If someone you don’t know calls you to promote an investment, hang up.

I hope the DOJ prosecutes this fraud ring vigorously. I also hope they uncover the many more that are still in operation.

What do you think about this massive fraud? What other frauds do you think may be lurking in financial markets?

Leave a comment at the bottom and let me know!

Have a wonderful weekend everyone! 👋

More on markets:

AMC Fails to Deliver Pass 1.3 Million in Latest Report

NYSE Investigating Shopify Stock Plunge; Citadel Involved

AMC Now #4 Most Shorted Stock

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Photo: “Day 12 Occupy Wall Street September 28 2011 Shankbone 30” by david_shankbone is marked with CC PDM 1.0.

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