By Ann C. Logue
Once again, the SEC has issued charges against a penny stock pump-and-dump scheme. This time, 16 people with ties to various countries in the Caribbean as well as Bulgaria, Canada, Monaco, Spain, Turkey, and the United Kingdom have been accused of operating schemes that generated more than $194 million in illicit proceeds.
Those charged worked for a firm called Antevorta Capital Partners, which provided investment banking and advisory services to companies that were interested in going public or raising capital through reverse mergers, OTC offerings, and penny stock offerings on the Canadian Securities Exchange. This is a legitimate business, even if it sometimes veers into sketchiness. And allegedly, the folks at Antevorta steered into the mess. The SEC alleges that the defendants amassed a significant majority of shares in certain of the stocks, and then secretly funded promotional campaigns to pump the stocks to investors, then dumped them when the demand (and price) increased.
The Antevorta scheme used boiler rooms to contact victims. It’s shocking to realize that there are enough people out there who both answer their phones and fall for brokers promising huge profits. There’s evidence that a lot of people who get involved in frauds know there is something going on, but they think that they are smart enough to get out before there is trouble. For example, many of the people who invested with Bernie Madoff were sophisticated investors; they figured that his secret was that he was front-running trades (which is illegal), not that he made the whole thing up (which is also illegal.)
There will always be people who think they can get away with something, although they will get caught—eventually.
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