The SEC has announced charges against 16 investors accused of generating more than $194 million in illegal proceeds in fraudulent microcap stock schemes that stretched over multiple years.
The SEC announced the charges on Tuesday, April 19, and is seeking punishments that include disgorgement of ill-gotten gains plus interest, permanent injunctions, and more.
The assets of six of the defendants were frozen and repatriation directed through court orders issued on April 12 and April 15.
How the Fraud Worked
The schemers operated in a variety of locations, including Canada, Spain, the United Kingdom, Turkey, Monaco, Bulgaria, the Bahamas, the British Virgin Islands, and the Cayman Islands.
The SEC alleges that they used encrypted text and phone applications to buy and sell microcap stocks through numerous offshore accounts. The SEC also claims that several of the defendants funded promotional campaigns designed to entice investors in the US and other countries to invest in the stocks they had targeted.
In a press release announcing the charges, the Director of the SEC’s Division of Enforcement, Gurbir S. Grewal, said:
“We allege that the defendants in these actions orchestrated some of the most complex microcap stock fraud schemes ever charged by the SEC. By locating their operations overseas, using encrypted messaging, and operating through a convoluted network of offshore accounts, the defendants hoped to avoid detection of the massive frauds we allege they perpetrated on US markets and investors. However, investigative teams from three SEC offices doggedly kept on their trail, working across borders, and ended this alleged global scheme.”
The Bottom Line …
The detailed schemes orchestrated by these defendants are further proof that microcap stock investors need to be extremely careful and do their due diligence before investing.
Microcap stocks often have limited information, and that makes it important for investors to make a real effort to understand and get to know exactly what they are putting their money in.
The good news is when you find a quality microcap stock, the gains can be quick and high.
Photo by Adeolu Eletu on Unsplash