ComplianceOnline

New York-Based Penny Stock Promoter Charged with Fraud

  • Date: January 27, 2011
  • Source: Admin
Abstract:

On Jan 14, 2011, the Securities & Exchange Commission (SEC) charged an upstate New York-based penny stock promoter Christopher Wheeler and his affiliated website OTCStockExchange.com with fraud for failing to disclose that he was paid by certain issuers to promote their stock. Simultaneously he liquidated millions of his own shares and profited by at least USD 2.95 million.  

According to SEC, Wheeler received compensation at various times in 2007 and 2008 to promote several thinly-traded penny stocks on his website.  The website claimed it had compiled a long list of successful stock picks which afforded an opportunity to investors to make a fortune.  Wheeler featured the issuers’ stock on his website, recommending that investors purchase the securities.  He posted lofty price predictions for the stock without any reasonable basis.  The promotional efforts often led to dramatic but temporary increases in the volume of shares traded and the price of the issuers’ securities.  Once the prices went up, Wheeler dumped shares from his personal brokerage account onto the market.  

Regulations

Wheeler and OTCStockExchange.com concealed from investors that Wheeler was paid to hype the very stocks that he was unloading from his own account.  Securities laws require stock promoters to disclose their compensation so investors can make informed decisions about the credibility of the information they are being provided. Wheeler’s failure to disclose that he was paid by certain issuers to promote their stock thus violated the securities laws.  

The SEC's complaint seeks a final judgment permanently enjoining Wheeler and OTCStockExchange.com from future violations of the federal securities laws, and an order permanently barring Wheeler from participating in any offering of penny stock, requiring the defendants to pay financial penalties, and requiring the defendants and North Coast to disgorge all ill-gotten gains plus prejudgment interest.

Source:

http://www.sec.gov/news/press/2011/2011-12.htm



 

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