SEC claims $1.3 million pump-and-dump scam used compromised accounts • The Register

America’s financial regulator has accused 18 individuals and shell companies of using compromised brokerage accounts to manipulate stock prices to rake in $1.3 million in illicit gains.

According to the SEC complaint, scammers broke into at least 31 American brokerage accounts in the United States, Canada, and the Dominican Republic in late 2017 and early 2018.

They then used the compromised accounts to make large purchases of shares in Lotus Bio-Technology Development and Good Gaming, which artificially inflated the trading price and volume of those shares, the SEC claimed. The bad guys, named by the regulator, were already controlling large blocks of shares and cashing in after share prices soared.

“The defendants sold the shares they had acquired at inflated prices, raising approximately $1.3 million in proceeds and generating substantial profits for the defendants,” the SEC complaint reads [PDF]filed in federal district court in Atlanta.

In addition to the hacking and price rigging, some of the scammers also allegedly attempted to hide their ownership of Lotus Bio-Tech and Good Gaming, including by using offshore accounts and not filing beneficial ownership reports with the SEC as required by law , the court was informed.

“Our complaint describes a brazen and sophisticated scheme in which hackers use international accounts and bogus account holders to cover their tracks,” said Nekia Hackworth Jones, director of the SEC’s Atlanta regional office, in a expression.

The SEC charges against the group include violations of the anti-fraud and beneficial ownership reporting regulations of the Securities Act of 1933 and the Securities Exchange Act of 1934. It also seeks the return of ill-gotten gains plus interest, penalties, suspensions and others fair relief.

Some of the people and companies charged in connection with the alleged hacking and securities fraud scam (sidenote: you have to dedicate an entire wall to create a proof board and maintain all those connections) include:

  • Avatele Group, based in Wyoming and led by Richard Tang, whose wife Anna Tang is also said to be involved.
  • Jeffrey Cox, 56, lives in Calgary, Alberta, Canada. He was President and CEO of First Calgary Capital, which provided investor relations services and awareness campaigns for microcap companies.
  • Harmony Ridge Corp, which was 100% owned by Richard Tang.
  • HE Capital is based in the Dominican Republic. Another defendant, Richard Smith, is a co-founder of HE Capital and was its 50% owner at the relevant periods. The SEC also believes that Smith’s son, Christopher Smith, was HE Capital’s secretary and Robert Seeley managed the day-to-day operations of the firm. Both are named as accused.
  • Glenn Laken, 68, lives in Chicago, Illinois, and is the president, chairman and controlling shareholder of CMG Holdings Group, which in turn was the majority shareholder of Good Gaming — at least as of May 2017. Laken was convicted of securities fraud related to a stock sale program in the early 1990s 2000s and was serving a 63-month federal prison sentence.
  • Maximum Ventures Holdings, a privately held Wyoming company owned and jointly controlled by Anna Tang by both Tangs.
  • Christophe Merani, 31, lives in Glendale Heights, Illinois and is a Sewell associate who worked with David Wong.
  • Rahim Mohamed, 45, from Calgary, Alberta, Canada and the Cayman Islands. He is also the owner of Nexium Financial and CEO and Chairman of Softlab9 Technologies. Mohamed also controls or controlled a brokerage firm in the Cayman Islands called White Sands Securities.
  • Zoltan Nagy, 55, lives near Vancouver, British Columbia, Canada and has ties to Point Roberts, Washington. Nagy founded Lotus Bio-Tech and was the controlling shareholder, according to the SEC, although he had divested himself on at least one occasion. He was also sole director and director of microcap public company Black Rock Petroleum, a spin-off of Lotus Bio-Tech.
  • POP Holdings is a privately held Nevis corporation based in the Dominican Republic and owned by Christopher Smith who served as President and his father, Richard Smith, was Secretary of the firm. In the meantime, we are told, Seeley has been running day-to-day operations.
  • Robert Seeley, 48, is a British citizen residing in the Dominican Republic and has worked with the Smiths as an authorized signatory on some HE Capital and POP brokerage accounts.
  • Phillip Sewell, 61, is a British citizen living in Vancouver, BC, Canada and is a co-founder of Catalyst Capital Group, a privately held Canadian financial advisory firm, with Davies Wong.
  • Christopher Smith, 52, is a British citizen living in the Dominican Republic.
  • Richard Smith, 78, is a British citizen living in the Dominican Republic.
  • Anna Tang, 43, lives in Richmond, BC, Canada.
  • Richard Tang, 44, also lives in Richmond, BC, Canada and is married to Anna Tang.
  • Breanne Wong, 33, is a Canadian citizen living in Panama and Vancouver, BC, Canada. She was formerly a stockbroker for a Panamanian brokerage firm.
  • Davies Wong, 62, lives in Vancouver, BC, Canada and is, we’re told, the father of Breanne Wong and cousin of Anna Tang. He co-founded Catalyst Capital with Sewell, served as CEO, and is also President and owner of Fusion Business Group.

And here’s the synopsis of how the various family members, friends, and fraudulent companies worked together to allegedly pull off the international scam:

Davies Wong and Glenn Laken controlled the bulk of the shares in Lotus Bio-Tech and Good Gaming, which were sold while Mohamed hacked into the accounts, sources say. Mohamed is also said to have coordinated with the Wongs, Laken and others to orchestrate the attacks, sources say. Meanwhile, Richard Tang was reportedly involved in both the Lotus Bio-Tech and Good Gaming programs. ® SEC claims $1.3 million pump-and-dump scam used compromised accounts • The Register

Laura Coffey

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