Cracking down on an international pump-and-dump scheme, the SEC brought securities fraud charges against a U.K.-based broker-dealer, its investment manager, a U.S.-based microcap company and several individuals for manipulative trading in the microcap’s securities. The defendants have also been charged in a parallel criminal action, and trading in the company’s securities was suspended(SEC v. Beaufort Securities Ltd., March 2, 2018).
"The SEC and its law enforcement partners will continue to aggressively work together to root out such manipulation, wherever the alleged perpetrators and their brokerage firms reside, and despite their best efforts to conceal and disguise their methods," said Marc P. Berger, Regional Director of the SEC’s New York office.
Pump-and-dump. According to the SEC, U.K.-based Beaufort Securities Ltd. and Peter Kyriacou, an investment manager at Beaufort, undertook a scheme to manipulate the securities of a U.S.-based microcap issuer, HD View 360 Inc., for profit. In an FBI operation, an undercover agent who represented his business as running pump-and-dump schemes discussed with Kyriacou steps to drive up the stock price of HD View and then sell the shares at a large profit.
As alleged, Kyriacou and Beaufort opened brokerage accounts for the undercover agent in the name of nominees in order to conceal his identity and connection to trading activity. To create the false appearance of liquidity, they suggested the agent could "game the market" through matched trades.
From HD View’s side, the company’s CEO, Dennis Mancino, and another individual allegedly agreed to use the agent’s network of brokers to create fraudulent retail demand for the stock and then liquidate at an artificially high price, in exchange for a kickback from the trading proceeds. Coordinated by the agent, the two individuals executed what they believed was a "test trade" consisting of a sell order filled by an opposing purchase order by a broker at Beaufort.
Before connecting with the Beaufort scheme, the HD View defendants had allegedly used three entities they controlled to execute a similar matched trades pump-and-dump.
Charges. The SEC charged Beaufort and Kyriacou with violating Exchange Act 10(b) and Rule 10b-5, and charged the HD View defendants with violating Section 17(a)(1) of the Securities Act of 1933, Sections 9(a)(1), 9(a)(2), and 10(b) of the Exchange Act and Rules 10b-5(a) and (c). The SEC seeks disgorgement, prejudgment interest, penalties, and penny stock bars, and an officer-and-director bar against Mancino.
In addition to coordinating with the FBI, the SEC received assistance from the Office of the United States Attorney for the Eastern District of New York, the Internal Revenue Service, the Alberta Securities Commission, the Ontario Securities Commission, the Financial Conduct Authority of the United Kingdom, and the Financial Industry Regulatory Authority.
Attorneys: David Norwich Gopstein, U.S. Attorney's Office, for the United States.
Companies: HD View 360 Inc. TJM Investments Inc. DJK Investments 10 Inc. WT Consulting Group LLC.
MainStory: TopStory BrokerDealers Enforcement FraudManipulation InternationalNews NewYorkNews
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