Market Manipulation and Trading Violations

December 11, 2015

The SEC announced fraud charges and a court-ordered asset freeze against penny stock company Oxford City Football Club, Inc.  The SEC alleges that Oxford City’s CEO, Thomas Anthony Guerriero, used pressure tactics and a boiler room of salespeople to raise more than $6.5 million from primarily inexperienced investors who were misled to believe that the company was a thriving conglomerate of sports teams, academic institutions, and real estate holdings.  The company even falsely touted itself as “the largest publicly traded diversified portfolio of professional sports teams in the world.”  In reality, the company was losing millions of dollars each year and turning zero profit from its two lower-division soccer teams in the U.K.  SEC

December 3, 2015

The SEC announced fraud charges against three Chicago-based traders, twin brothers Behruz and Shahryar Afshar and their friend and former broker Richard Kenny, for circumventing market structure rules through a pair of options trading schemes.  Options exchange rules provide that a non-broker-dealer that places more than 390 orders in options per day (on average) during any month will be designated as a “professional” for the next quarter.  This designation applies to all accounts beneficially owned by a trader.  The SEC alleges that despite far exceeding this threshold in every quarter between October 2010 and December 2012, the Afshar brothers were able to trade as non-professionals, thus obtaining execution priority and lower fees, by alternating their trading between accounts and falsely representing the ownership of their accounts.  The SEC also alleges that the defendants engaged in a “spoofing” scheme in which they placed non-bona fide orders to take advantage of a “maker-taker” program offered by an options exchange to encourage liquidity.  SEC

November 17, 2015

The SEC announced fraud charges against several alleged perpetrators behind a $78 million pump-and-dump scheme involving the stock of Jammin’ Java, a company that operates as Marley Coffee and uses trademarks of late reggae artist Bob Marley to sell coffee products.  The SEC alleges that Jammin Java’s former CEO Shane Whittle orchestrated the scheme with three others who live abroad and operate entities offshore.  Whittle utilized a reverse merger to secretly gain control of millions of Jammin Java shares, and he spread the stock to the offshore entities controlled by Wayne Weaver of the UK and Canada, Michael Sun of India, and René Berlinger of Switzerland.  The shares were later dumped on the unsuspecting public after the stock price soared following fraudulent promotional campaigns.  SEC

November 5, 2015

The SEC filed securities fraud charges against Scottish trader James Alan Craig based on false “tweets” authored by Craig which caused sharp drops in the stock prices of two companies.  Craig created fake twitter accounts designed to look like the twitter accounts of well-known securities research firms.  His false tweets, claiming that the target companies were under investigation, caused the share price of Audience, Inc. to fall 28% and the share price of Sarepta Therapeutics, Inc. to fall 16%.  Craig bought and sold shares of the two companies in a largely unsuccessful attempt to profit from the sharp price swings.  SEC

October 28, 2015

The SEC barred two brokers from now-defunct Connecticut brokerage Rochdale Securities.  According to the SEC’s allegations, the two brokers defrauded customers by using their order information to advise two longtime customers to trade ahead of these orders.  As a result, the favored customers profited from the trades, the defrauded customers generally received worse prices than if their orders had been routed directly to the market, and the brokers received double trading commissions.  SEC

October 14, 2015

As part of its enforcement initiative focused on violations of Rule 105 of Regulation M, the SEC settled enforcement actions against six firms: Auriga Global Investors, Sociedad de Valores, S.A., Harvest Capital Strategies LLC, J.P. Morgan Investment Management Inc., Omega Advisors, Inc., Sabby Management LLC, and War Chest Capital Partners LLC.  Rule 105 is intended to preserve the independent pricing mechanisms of the securities markets and prevent stock price manipulation by prohibiting firms from participating in public stock offerings after selling short those same stocks.  Through its Rule 105 Initiative, first announced in 2013, the SEC has taken action on every Rule 105 violation over a de minimis amount that has come to its attention – promoting a message of zero tolerance for these offenses.  As a result of this Initiative, the SEC has seen a dramatic decrease in Rule 105 violations.  The firms identified in this round of enforcement have agreed to pay over $2.5 million to settle the SEC’s charges.  SEC

October 8, 2015

New York-based proprietary trading firm, Briargate Trading LLP, and its co-founder, Eric Oscher, will pay more than $1 million to settle charges by the SEC of “spoofing.”  An SEC investigation found that Briargate and Oscher orchestrated a scheme in which they placed sham orders (“spoofs”), to create the appearance of interest in stocks and manipulate their prices, and then placed bona fide orders on the opposite side of the market to take advantage of the artificially inflated or depressed prices.  Immediately after the bona fide orders were executed, the spoof orders were cancelled.  Through this conduct, perpetrated between October 2011 and September 2012, Oscher and Briargate reaped approximately $525,000 in profits.  SEC

September 24, 2015

Michael A. Glickstein and his new York-based investment advisory firm, G Asset Management LLC, will collectively pay $275,000 to settle fraud charges by the SEC.  The SEC alleged that Glickstein and G Asset issued a misleading press release announcing their offer to purchase a majority stake in retail bookseller Barnes & Noble which caused Barnes & Noble’s stock price to rise $1.94 per share.  The SEC’s order instituting a settled administrative proceeding found the press release to be misleading because it did not disclose that: (1) G Asset had no ability to finance its purported offer to purchase Barnes & Noble; and (2) that G Asset had recently purchased thousands of Barnes & Noble shares and short-term call options, intending to profit by selling the shares and options after issuing the press release.  SEC

September 14, 2015

The SEC charged three men with attempting a pump-and-dump scheme that was thwarted by the SEC’s preemptive action to suspend trading in the company’s securities before secretly-controlled shares could be dumped on unsuspecting investors.  The SEC’s complaint alleges that the three men schemed to conceal their control over 40 million shares of Endeavor Power Corp. and artificially inflate Endeavor’s share price through manipulative trading and a campaign of misinformation.  The scheme was thwarted when the SEC suspended trading in Endeavor’s securities on March 8, 2013.  SEC

September 10, 2015

The SEC charged New York Global Group (NYGG) and its CEO, Benjamin Wey, with secretly obtaining control and manipulating the stock of Chinese companies they were purportedly guiding through the process of raising capital and becoming publicly-traded in the United States.  The SEC alleges that Wey and NYGG structured reverse mergers between clients and publicly-traded shell companies to secretly obtain ownership interests in the newly listed companies, which they concealed through a vast network of foreign accounts.  The SEC alleges they generated tens of millions of dollars in illegal profits as they sold the securities into artificially inflated markets.  In addition to Wey and NYGG, Wey’s wife and sister, their Switzerland-based broker, and two attorneys have been charged as well.  SEC