Jul 31

Stock promoter Randy Hamdan sues SeekingAlpha author Matt Finston for Libel in response to negative article on Creative Edge Nutrition $FITX

Randy Hamdan, a stock promoter currently being sued by the SEC, has sued SeekingAlpha author Matt Finston for libel. See the article on SeekingAlpha that led to this. The case was filed in the Eastern District of Michigan; the case number is 2:14-cv-12949-GAD-MKM. I saved a copy of the complaint and all exhibits (PDF). Finston is asking for support in defending against this suit. Below is an excerpt from the complaint:

8. Just a few examples of Defendant’s false and defamatory statements regarding Plaintiff are as follows: a. That Plaintiff has a “fraudulent past”. (See Exhibit A).
b. That Plaintiff and HH Group, LLC were issued 420 Million shares of stock in Creative Edge Nutrition Inc. (ticker symbol FITX) for $0.001 per share. (See Exhibit B).
c. That “Vgpr didn’t survive Hamden”, implying that Plaintiff caused Vega Biofuels Inc. to fail or go out of business. (See Exhibit C).
d. That “DNAX is another”, implying that Plaintiff caused DNA Brands, Inc. to fail or go out of business. (See Exhibit D).
e. That Plaintiff “dumped” FITX stock “into the promotion three years ago”. (See Exhibit E).
f. That Plaintiff is “a serial pump and dump and he’s been charged by the SEC for it.” (See Exhibit F).
g. That Plaintiff is “a known pump and dump”. (See Exhibit G).
h. That Plaintiff is “an investor relations ponzi”. (See Exhibit H).
i. Plaintiff has posted statements implying that Amineh A. Hamdan and Fihmiya Anwar Hamdan (Plaintiff’s parents) are associated with Hezballah and/or are engaged in or associated with terrorism — for the purpose of further implying that Plaintiff and his family are tied to Hezballah and terrorism. (See Exhibit I).
j. That Plaintiff is “using more profiles to harass and intimidate and pump”. (See Exhibit J).

Below I examine each of these claims. Do note that I am not a lawyer so my opinion may not be the most informed on whether Hamdan has a good case or not.

a. “That Plaintiff has a “fraudulent past”.

While my lawyers would not like me to use these words if there has not been a criminal fraud conviction, the actions that Randy Hamdan is alleged to have engaged in by the SEC clearly fit the common definition of fraud even if he was not criminally charged with fraud (highlighting mine; excerpted from SEC legal complaint against Hamdan):

Randy A. Hamdan (“Hamdan”) began the scheme by creating a market with manipulative purchases and sales of the securities of CompuSonics in September 2009 through his wholly owned entity, Oracle Consultants, LLC (“Oracle Consultants”), and continued it with a marketing campaign that began in early October 2009 and culminated on October 19, 2009 with the issuance, by an international news distribution service, of a false press release regarding the company’s purported positive business developments

If Finston had used the modifier “allegedly” (because Hamdan has not settled or lost the case yet), his statement would be substantially true. If Hamdan does settle the SEC suit or loses it then he would have no cause for action on the basis of that statement.

b. That Plaintiff and HH Group, LLC were issued 420 Million shares of stock in Creative Edge Nutrition Inc. (ticker symbol FITX) for $0.001 per share. (See Exhibit B).

This is a true fact. Below are excerpts from the 2013 FITX annual report list of share issuances:

Shareholder | Number of shares issued | price
HH Group LLC. 3/4/2013 32,000,000 0.001 conversion Restricted
HH Group LLC. 3/4/2013 28,000,000 0.001 conversion Restricted
HH Group 5/5/2013 36,500,000 0.001 Paid debt Restricted
HH Group 5/8/2013 10,000,000 0.001 services Restricted
HH Group 5/15/2013 72,000,000 0.001 Paid line of credit off Restricted
HH Group LLC. 7/9/2013 52000000 0.001 Paid debt Restricted
HH Group LLC. 7/9/2013 10000000 0.001 Paid debt Restricted
HH Group LLC. 7/9/2013 5000000 0.001 Paid debt Restricted
HH Group LLC. 7/9/2013 20000000 0.001 Paid debt Restricted
Rhamdan 8/21/2013 10204081 0.001 Paid debt Restricted
Rhamdan 8/21/2013 10204081 0.001 Paid debt Restricted
Rhamdan 8/21/2013 20408163 0.001 Paid debt Restricted
Rhamdan 9/6/2013 50000000 0.001 Paid debt Restricted
HH Group, LLC 9/6/2013 10204081 0.001 Paid debt Restricted
HH Group, LLC 9/6/2013 10204081 0.001 Paid debt Restricted
HH Group, LLC 9/6/2013 40816326 0.001 Paid debt Restricted

c. That “Vgpr didn’t survive Hamden”, implying that Plaintiff caused Vega Biofuels Inc. to fail or go out of business. (See Exhibit C).

Vega Biofuels (VGPR) is still in business. However, if Finston meant that the stock price declined as a result of Hamdan, then his statement is correct. Selling by shareholders into paid promotions causes stocks to fall. Hamdan’s company paid for some promotion of VGPR. Example below:

StockRockandRollLLC® has been compensated three thousand cash for one-day coverage on VGPR by HH Group LLC. [excerpt from email received from stockloackandload.com.com on 4/20/2011]

d. That “DNAX is another”, implying that Plaintiff caused DNA Brands, Inc. to fail or go out of business. (See Exhibit D).

As with Vegas Biofuels, it is clear that while the company didn’t go out of business, the stock price dropped substantially, at least partially as a result of shareholders selling into the stock promotion that was at least partly paid for by Hamdan’s company HH Group LLC. See excerpt from a promotional email below:

Market Wrap Media, Inc. accepts compensation from companies for advertising services.
  Market Wrap Media, Inc. has been contracted to receive $2,500 by a third party (HH Group LLC) for 1 day of advertising service for DNAX. [excerpt from email received from pennystocknewspaper.com on 11/30/2011]

e. That Plaintiff “dumped” FITX stock “into the promotion three years ago”. (See Exhibit E).

This is the point of a stock promotion: to enable large shareholders to sell shares. It is a true fact that Hamdan owned (and continues to own) millions of shares and that his company HH Group LLC paid for numerous promotional emails promoting FITX back in 2012. Unless Hamdan and his companies did not sell any shares during the promotions this is a substantially true statement. While 2012 is only two years ago and not three, it is close enough for the statement to be substantially true and thus not libelous. Below is an excerpt from just one of many promotional emails on FITX I received in 2012, paid for by Hamdan’s HH Group LLC:

We expect to be compensated fifteen thousand dollars by a non-affiliate third party, HH Group, LLC, for a one week advertisement of Creative Edge Nutrition, Inc. [excerpt from email received from ExplosiveOTC.com on 110/1/2012]

f. That Plaintiff is “a serial pump and dump and he’s been charged by the SEC for it.” (See Exhibit F).

This is a true fact: Hamdan and his companies have paid for stock promotion on many companies (more than just the three that Finston mentioned). Paying for stock promotion and then selling shares is the very definition of a pump and dump. The SEC sued Hamdan for his role in the pump and dump of Compusonics in 2009:

FACTS Fraudulent Stock Marketing Campaign 8. From September 27, 2009 through October 19, 2009, Hamdan carried out a fraudulent marketing campaign designed to increase the trading price of CompuSonics’ stock. In substance, the fraudulent marketing campaign was to the effect that CompuSonics would soon release information concerning a settlement of a patent infringement matter that would “reward” shareholders. Hamdan caused the dissemination of materially false information concerning CompuSonics by means of stock newsletters, a website, a message board, and a press release. To facilitate the dissemination of the false information and conceal his role in the scheme, Hamdan employed an anonymous email service, a proxy server, and fictitious contact information.

g. That Plaintiff is “a known pump and dump”. (See Exhibit G).

This is a true fact (if you ignore Finston’s abuse of the English language): Hamdan’s companies have paid for multiple stock promotions.

h. That Plaintiff is “an investor relations ponzi”. (See Exhibit H).

This statement is meaningless hyperbole but even if it was libelous it was not made by Finston — he simply linked to a publicly accessible accusation by another individual.

i. Plaintiff has posted statements implying that Amineh A. Hamdan and Fihmiya Anwar Hamdan (Plaintiff’s parents) are associated with Hezballah and/or are engaged in or associated with terrorism — for the purpose of further implying that Plaintiff and his family are tied to Hezballah and terrorism. (See Exhibit I).

This is in my opinion the strongest charge against Finston. However, it is important to note that he did not state that Randy Hamdan or his parents are involved with Hezbollah — he listed their names and then linked to an online news article discussing Mohammed Hamdan, also of Dearborn, who was arrested for looking to join Hezbollah. To those who are not aware (my wife is from Detroit so I am quite aware), Dearborn has a huge Arab immigrant population. A search of the last name Hamdan on WhitePages.com found 58 people in Dearborn with that last name. The article linked by Finston on the Detroit Press website did not mention Mohammed Hamdan’s parents names, but another article I found quoted his mother, Monira Beydoun. So it is clear that the alleged terrorist has a different mother than Randy Hamdan and they are likely either not related at all or only distantly related. One important question I have about the Hezbollah issue is to whom did Finston make that statement? It appears to be in an instant message (it is Exhibit I in the legal complaint). If that message was to Bill Chaaban or someone close to him or Hamdan then it cannot have caused any damage to Hamdan’s reputation. Searching the web for “Hamdan” and Randy Hamdan’s parents’s names only brings up blog posts, message board posts, and excerpts from the libel lawsuit, not anything published by Matt Finston.

j. That Plaintiff is “using more profiles to harass and intimidate and pump”. (See Exhibit J).

At least according to one message board poster I trust, Randy Hamdan has sent some nasty private messages to people and it would be reasonable to believe that the purpose of those messages was to intimidate. So after looking at all the claims made by Randy Hamdan I conclude that his case is very weak. I may be wrong about that as I am not an expert.

Disclaimer: I have no position in any stock mentioned although I have traded FITX in the past. I have no relationship with any parties mentioned above although after researching this case I am inclined to contact Matt Finston and offer him legal help (I know a great Michigan libel lawyer). This disclaimer will not be updated unless I update the blog post. This blog has a terms of use that is incorporated by reference into this post; you can find all my disclaimers and disclosures there as well.

Jul 21

John Babikian update: SEC settles with him, his assets sold off by Revenue Quebec

The SEC settled its lawsuit with John Babikian two weeks ago. This lawsuit, for the promotion and scalping of the stock of America West Resources (defunct now, traded as AWSR then). To the untrained eye, this looks like a tiny slap on the wrist considering all the stock promotions Babikian has run. But the suit against Babikian for AWSR was likely brought in a hurry because of his attempts to liquidate his American assets. As FINRA and the SEC already had investigated AWSR in connection with John Thomas Financial, it was easy to put together a quick lawsuit against Babikian showing that he scalped his promotion. Only the one stock was covered in that SEC lawsuit so the SEC is free to bring more suits against Babikian. Also there is the possibility of criminal charges against Babikian, as pointed out in this Oregon Live article that discusses his investment in an Oregon vineyard:

There remains the possibility the SEC opted to settle to make way for federal prosecutors. If the Department of Justice opts to bring a criminal case against Babikian then Martin’s situation could get more complicated, not less.

Below is from the press release by the SEC:

U.S. SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 23039 / July 8, 2014

Securities and Exchange Commission v. John Babikian, Civil Action No. 14-CV-1740 (S.D.N.Y.)

Court Enters Final Judgment Against Promoter in Settlement of Microcap Stock Scalping Case and Orders $3.73 Million in Sanctions

The Securities and Exchange Commission announced today that the Honorable Paul A. Crotty of the United States District Court for the Southern District of New York entered a final judgment on July 8, 2014, against defendant John Babikian in the Commission action styled, SEC v. John Babikian, Civil Action No. 14-CV-1740 (S.D.N.Y.). The Court entered the final judgment, to which Babikian consented without admitting or denying the allegations in the Commission’s Complaint. The final judgment orders Babikian to pay a total of $3,730,000, comprised of $1,915,670 in disgorgement, together with prejudgment interest in the amount of $128,073, and a civil penalty in the amount of $1,686,257. The final judgment also imposes a bar from participating in any offering of penny stock and enjoins Babikian from recommending, directly or indirectly, the purchase of any U.S. publicly traded or quoted stock without simultaneously disclosing any plans or intentions to sell such stock within 14 days of the recommendation. Finally, the final judgment permanently enjoins Babikian from violating Section 17(a) of the Securities Act of 1933 (15 U.S.C. § 77q(a)), Section 10(b) of the Securities Exchange Act of 1934 (15 U.S.C. § 78j(b)) and Rule 10b-5 promulgated thereunder (17 C.F.R. § 240.10b-5).

The Commission’s complaint, filed on March 13, 2014, alleged that Babikian used AwesomePennyStocks.com and its related site PennyStocksUniverse.com, collectively “APS,” to commit a brand of securities fraud known as “scalping.” The APS websites disseminated e-mails to approximately 700,000 people shortly after 2:30 p.m. Eastern time on the afternoon of Feb. 23, 2012, and recommended the penny stock America West Resources Inc. (AWSRQ). What the e-mails failed to disclose among other things was that Babikian held more than 1.4 million shares of America West stock, which he had already positioned and intended to sell immediately through a Swiss bank. The APS emails immediately triggered massive increases in America West’s share price and trading volume, which Babikian exploited by unloading shares of America West’s stock over the remaining 90 minutes of the trading day for ill-gotten gains of more than $1.9 million.

The Commission wishes to acknowledge the assistance of the Quebec Autorité des Marchés Financiers and the Financial Industry Regulatory Authority.

Disclaimer: I have no position in any stock mentioned. I have no relationship with any parties mentioned above. This blog has a terms of use that is incorporated by reference into this post; you can find all my disclaimers and disclosures there as well.

Jul 21

SEC seeks $12.2 million penalty against Jean-Francois Amyot in Spencer Pharma case

The SEC has filed a proposed default judgement in their lawsuit against Jean Francois Amyot.

See the Stockwatch article for a good synopsis, excerpted below:

The U.S. Securities and Exchange Commission has filed a motion for a default judgment of up to $12.2-million against Quebec’s Jean-Francois Amyot, citing his “especially egregious” conduct in a 2010 pump-and-dump. (All figures are in U.S. dollars.) The SEC says he sold 22 million unregistered shares of a pink sheets company called Spencer Pharmaceuticals Inc. while orchestrating a bogus takeover. The scheme involved several false and misleading news releases, and resulted in profits to Mr. Amyot of $5.8-million, according to the SEC.

 

See the original SEC litigation release and the SEC’s legal complaint from 2012.

Excerpt from the litigation release:

The Commission’s complaint, filed in the U.S. District Court for the District of Massachusetts, alleges that beginning in November 2010, Spencer, a purported pharmaceutical company with addresses in Boston, Massachusetts, and Canada, disseminated false and misleading press releases claiming that it had received an unsolicited buyout offer from a Mideast company for $245 million when, in fact, the purported buyout offer was not real. The complaint further alleges that Arella and Morrice worked with Amyot to create and disseminate the fraudulent press releases. According to the complaint, while Spencer was issuing the press releases, the defendants were conducting a promotional campaign using Internet websites and newsletters to tout Spencer’s stock and the bogus buyout offer, and the false press releases and promotional campaign were successful in pumping up the price of Spencer’s stock. For example, after Spencer publically announced that the Mideast company proposed to pay $245 million for Spencer, the price of Spencer stock more than doubled in two days – opening at $0.25 per share on November 10, 2010 and closing at $0.60 per share on November 12 – and the daily trading volume for Spencer’s stock reached almost six million shares on November 11, compared to a daily average trading volume of less than 50,000 shares during the previous three months. During the time the buyout offer was being promoted, Amyot sold approximately 36 million Spencer shares for gross proceeds of approximately $5.8 million. Each of the defendants are charged by the Commission with violating various antifraud provisions of the federal securities laws. The complaint further charges Spencer, Amyot, and Arella with violating securities registration provisions of the securities laws. According to the complaint, Amyot and Arella were involved in a series of transfers involving 12 million Spencer shares that were done to evade the securities registration requirements and move the shares into an account controlled by Amyot.

 

Disclaimer: I have no position in any stock mentioned. I have no relationship with any parties mentioned above. This blog has a terms of use that is incorporated by reference into this post; you can find all my disclaimers and disclosures there as well.

Jul 15

Crumbs Bake Shop $CRMBQ bankruptcy update: Stalking horse bid details

Disclosure: I am short CRMBQ and I am a day-trader. I may close my short position or go long at any time. I am not a bankruptcy expert. This post is for informational purposes only.

 

Below is a copy of the docket in the Crumbs Bake Shop Inc (CRMBQ):

 

14-24287-MBK Crumbs Bake Shop, Inc.
Case type: bk Chapter: 11 Asset: Yes Vol: Judge: Michael B. Kaplan
Date filed: 07/11/2014 Date of last filing: 07/14/2014 
 

 

Doc.
No.
Dates Description
Filed & Entered: 07/11/2014
Docket Text Case Assigned
Filed & Entered: 07/11/2014
Docket Text Credit Card/Debit Card Payment
1
Filed & Entered: 07/11/2014
Docket Text Voluntary Petition (Chapter 11)
2
Filed & Entered: 07/11/2014
Docket Text Motion to Extend Time
3
Filed & Entered: 07/11/2014
Docket Text Motion for Joint Administration
4
Filed & Entered: 07/11/2014
Docket Text Motion (Generic)
5
Filed & Entered: 07/11/2014
Docket Text Motion (Generic)
6
Filed & Entered: 07/11/2014
Docket Text Motion (Generic)
7
Filed & Entered: 07/11/2014
Docket Text Motion to Retain Claims and Noticing Agent
8
Filed & Entered: 07/11/2014
Docket Text Motion (Generic)
9
Filed & Entered: 07/11/2014
Docket Text Motion to Reject
10
Filed & Entered: 07/11/2014
Docket Text Motion (Generic)
11
Filed & Entered: 07/11/2014
Docket Text Support
12
Filed & Entered: 07/11/2014
Docket Text Application for Designation as Complex Chapter 11 Case
13
Filed & Entered: 07/11/2014
Docket Text Application for Expedited Consideration of First Day Matters
15
Filed: 07/11/2014
Entered: 07/14/2014
Docket Text Notice of Missing Documents
14
Filed & Entered: 07/13/2014
Docket Text Notice of Appearance and Request
Filed & Entered: 07/14/2014
Docket Text Remark
16
Filed & Entered: 07/14/2014
Docket Text Shorten Time
17
Filed & Entered: 07/14/2014
Docket Text Amended Order (Generic)
18
Filed & Entered: 07/14/2014
Docket Text Notice of Appearance and Request
19
Filed & Entered: 07/14/2014
Docket Text Notice of Appearance and Request
20
Filed & Entered: 07/14/2014
Docket Text Notice of Appearance and Request
21
Filed & Entered: 07/14/2014
Docket Text Application to Appear Pro Hac Vice
22
Filed & Entered: 07/14/2014
Docket Text Motion (Generic)
23
Filed & Entered: 07/14/2014
Docket Text Application to Shorten Time
24
Filed & Entered: 07/14/2014
Docket Text Application to Appear Pro Hac Vice

Document #22 from yesterday includes the details of the Stalking Horse bid for Crumbs Bakeshop. Below are copies of all the documents related to that motion (all files are PDFs)

22
22-1
22-2
22-3
22-4

The actual stalking horse bid is in #22-2. Below are some of the relevant details:

ARTICLE III
CONSIDERATION; ADJUSTMENT
3.1 Consideration.
(a) The aggregate consideration for the Purchased Assets (the
“Purchase Price”) will consist of (i) an amount equal to and payable in the form of a credit bid of
the full amount of the obligations then outstanding under the DIP Credit Agreement and the Pre-
Petition Senior Secured Loan (such amount as may be increased pursuant to Section 3.1(b), the
“Credit Bid Amount”); and (ii) the assumption by Purchaser of the Assumed Liabilities.
(b) For the avoidance of doubt, at any time, and from time to time,
during the Auction, Purchaser may increase the Purchase Price by paying additional cash
consideration.

Note that the consideration does not include any payment to common shareholders of Crumbs Bake Shop.

Okay, so what liabilities are being assumed?

2.3 Assumption of Liabilities. On the terms and subject to the conditions set
forth in this Agreement, at the Closing, or in connection with the Designation Rights, at such later
date as Purchaser assumes any Assumed Contract (the “Assumption Date”) Purchaser will assume,
effective as of the Closing or the Assumption Date, and will timely perform and discharge in
accordance with their respective terms, the following Liabilities of Sellers existing as of the Closing
Date or the Assumption Date (collectively, the “Assumed Liabilities”):
(a) All Liabilities of Sellers under the Assumed Contracts and the
other Purchased Assets that arise on or after the Closing Date or the Assumption Date, as the case
may be;
(b) Any Cure Costs that Purchaser is required to pay pursuant to
(c) Unpaid Administrative Expenses (other than those Administrative
Expenses associated with Sellers’ Professionals) in an aggregate amount up to $150,000, but only
to the extent such unpaid Administrative Expenses (other than those Administrative Expenses
associated with Sellers’ Professionals) exceed the amount of available cash and cash equivalents
on the Sellers’ balance sheet; and
(d) Any Transfer Taxes as provided in Section 10.1.

2.4 Excluded Liabilities. Notwithstanding anything to the contrary set forth
herein, Purchaser will not assume and will be deemed not to have assumed, and Sellers will remain
liable with respect to, any and all Liabilities of Sellers arising out of, relating to or otherwise in
respect of the Business, the Employees, or the Purchased Assets prior to the Closing Date, and all
other Liabilities of Sellers, at any time existing or asserted, whether or not accrued, fixed, contingent
or otherwise, whether known or unknown, and whether or not recorded on the books and records of
Sellers or any of their Affiliates other than the Assumed Liabilities, (collectively, the “Excluded
Liabilities”). Purchaser will not be obligated to assume, and does not assume, and hereby disclaims
all of the Excluded Liabilities.

Also note that the purchaser is not assuming all the liabilities — some liabilities are excluded and will be retained by the empty shell of Crumbs Bake Shop (what shareholders own), leaving it with liabilities and no assets.

Now keep in mind that the stalking horse bid is an initial bid and the lowest price the assets can fetch. It is quite possible that another bidder could come in and bid enough for the assets that there would be some recovery for commmon shareholders. However, keep in mind that even this bid was a last-ditch, last-minute bid. The company was looking to liquidate in Chapter 7 after having engaged a firm to seek strategic buyers and being rebuffed by all of them — and this was a search not for buyers of the equity but for debtor-in-possession financing of a prepackaged bankruptcy (quote below from item 10-1).

14. Prior to the Filing Date, the Debtors retained GlassRatner Advisory & Capital
Group (“GlassRatner”) to, among other things, critically examine the Debtors’ business
operations and funding requirements. GlassRatner initiated a broad pre-petition marketing
process to solicit interest from potential investors. That dual track process targeted potential
investors that would (a) seek to acquire the Debtors’ business and/or (b) provide the Debtors
with capital to fund the ongoing operations. In consultation with the Debtors, GlassRatner
determined that only strategic investors or financial sponsors with an investment platform in the
specialty food sector could provide a viable solution given the critical state of the Debtors’
business. As such, only those parties that met that specific criteria were contacted.
15. Together with the Debtors, GlassRatner approached a total of 127 distinct parties
through 149 individual telephone calls. Of those parties contacted, 58 parties chose to receive
the “Investment Teaser” and/or requested additional information in order to evaluate a potential
transaction. All of the prospective investors contacted by GlassRatner, however, elected to pass
on the financing opportunity given: (a) concerns about the Debtors’ business operations; (b) the
Debtors’ financial condition; (c) recent results of operation and limited unencumbered assets;
and (d) the uncertainty around ultimate repayment. As of the Filing Date, GlassRatner’s
marketing effort did not result in a formal DIP loan proposal from any other third party.

Given the lack of interest then and the fact that Fischer/Lemonis entitites are already owed approximately $5 million by Crumbs Bake Shop and thus can afford to bid far more than other potential buyers (because $5 million of the purchase price is paying themselves). Couple that with the due diligence fee / breakup fee.

(b) If (i) this Agreement is terminated pursuant to Section 4.4(c) by
Purchaser or pursuant to Section 4.4(f), and (ii) a Competing Transaction is consummated, then
Sellers will pay to Purchaser in cash (A) an amount (the “Break-Up Fee”) equal to 3% of the
Purchase Price and (B) the Expense Reimbursement.

Assuming a $20 million purchase price, the breakup fee would be $700,000. And such a price is about equal to the company’s total liabilities so would result in little or no money being paid to holders of common equity in CRMBQ. Also, keep in mind that Crumbs continues to hemorrhage money: the net loss attributable to common stockholders in the first quarter of 2014 was $3,795,970.

The bottom line is that I think there is a very, very high probability that the common equity is worthless and shareholders get nothing. I expect the stock to fade slowly over the next few days to weeks.

[Edit 2014-7-17]: I completely misread the bid: the stalking horse bid is only for the amount of money owed to Lemonis Fischer Acquisition including the $1m in DIP financing they are offering, for a total bid of about $6.5 million. This would leave all other parties owed by Crumbs with little hope for recovery. Consequently equity holders are almost guaranteed to get nothing.

The roughly $6.5 million on the table is a “credit bid,” or a pledge of about $5.5 million in money already owed to Fischer as part of a loan it made to Crumbs this year, as well as money it will be owed as part of the bankruptcy loan, Crumbs’ lawyer Michael Sirota said in an interview.

Mr. Sirota said in court that the sale is on a tight timeline because the company will run out of money if the transaction doesn’t close around the end of next month.

Mr. Sirota, of Cole, Schotz, Meisel, Forman & Leonard, P.A., said after the hearing that a competing bidder would probably have to offer about $7 million to top what already is on the table. That price takes into account a 3% breakup fee that would have to be paid to Fischer and Mr. Lemonis.

Above quote from yesterday’s WSJ article.

Disclosure: [Update 2014-7-17: I am no longer short CRMBQ but would reshort if I could find the shares] I am short CRMBQ and I am a day-trader. I may close my short position, short more, or go long at any time. I have no relationship with any parties mentioned above. This blog has a terms of use that is incorporated by reference into this post; you can find all my disclaimers and disclosures there as well.

Jul 14

Trading in Cynk Technology $CYNK suspended by SEC

On Friday, July 11th early in premarket (prior to 8AM Eastern) shares of CYNK were halted by FINRA and given a U3 “exraordinary event” halt code. That would be only the second ever FINRA halt of an OTC stock (following the halt of BOPT in 2013). However, the halt code was changed after 9:00AM to indicate that trading in the stock was suspended by the SEC. It appears that the FINRA halt was put out to prevent premarket trading in the stock in case the SEC suspension did not go into effect in time. The impetus for the halt and then trading suspension was of course the meteoric rise of the stock following wash trading, manipulated run-up, and then massive short-squeeze. I remind the reader that it is the SEC’s position that manipulating a stock to create a short squeeze is illegal market manipulation and they made that clear in their 2012 lawsuit against Harbinger Capital Partners.

SEC trading suspension release (PDF)
SEC trading suspension order (PDF)

CYNK will reopen for trading at the market open on Friday, July 25th. The reason for the trading suspension is as follows:

The Commission temporarily suspended trading in the securities of CYNK because of
concerns regarding the accuracy and adequacy of information in the marketplace and
potentially manipulative transactions in CYNK’s common stock.

There have been a few good articles about the CYNK manipulation, which has been unique in that it was not accompanied by any sort of paid promotion.

Best articles:

CYNK The Aftermath — Putting together more pieces to the puzzle (Promotion Stock Secrets)
Cynk Technology Is The New Scheme In Town (SeekingAlpha)

Decent articles:

Here’s What Happened When We Tried Calling The CEO Of CYNK (Business Insider)
JAVIER ROMERO: I’m Not Actually The CEO Of CYNK And I Never Received One Dollar In Compensation (Business Insider)
Here’s The Real Story Behind The Founding Of CYNK, The Mysterious Penny Stock With The Surge That Shocked The Internet (Business Insider)

Cynk Makes the Case for Buying Friends, Naked Short Selling (Bloomberg View)

Cynk Short Squeeze Blamed by Trader for Costing Him Job (Bloomberg)

Searching for Cynk: The $6 Billion Penny-Stock Debacle, From Belize to Las Vegas (Bloomberg)

While I currently have no position in CYNK, I had actively traded it early on and managed to lose money overall in June because of my poor trading in CYNK. Below is one of my larger losses (net I think I lost about $13k on it)


($6,556)lossCYNKShort Stock
IB batch import through 7/2/2014

Posted by MichaelGoode /
http://profit.ly/1Mp7wI

cynk

Disclaimer: I have no position in any stock mentioned. I have no relationship with any parties mentioned above. This blog has a terms of use that is incorporated by reference into this post; you can find all my disclaimers and disclosures there as well.

Jul 13

Crumbs Bakeshop $CRMB bankruptcy documents

Below you will find PDF copies of almost all of the filings in the Crumbs Bake Shop (CRMB) bankruptcy filing as of today. They are listed in the order they are shown in the docket. The case is 14-24287-MBK in the New Jersey district of US Bankrtupcy Court.

1
1-1
3
3-1
3-2
4
4-1
4-2
5
5-1
5-2
5-3
6
6-1
6-2
6-3
8
8-1
8-2
10
10-1
10-2
10-3
10-4
10-5
10-6
10-7
12
12-1
13
13-1
Ireland affidavit

Docket report:

14-24287-MBK Crumbs Bake Shop, Inc.
Case type: bk Chapter: 11 Asset: Yes Vol: Judge: Michael B. Kaplan
Date filed: 07/11/2014 Date of last filing: 07/13/2014 
 

Doc.
No.
Dates Description
Filed & Entered: 07/11/2014
Docket Text Case Assigned
Filed & Entered: 07/11/2014
Docket Text Credit Card/Debit Card Payment
1
Filed & Entered: 07/11/2014
Docket Text Voluntary Petition (Chapter 11)
2
Filed & Entered: 07/11/2014
Docket Text Motion to Extend Time
3
Filed & Entered: 07/11/2014
Docket Text Motion for Joint Administration
4
Filed & Entered: 07/11/2014
Docket Text Motion (Generic)
5
Filed & Entered: 07/11/2014
Docket Text Motion (Generic)
6
Filed & Entered: 07/11/2014
Docket Text Motion (Generic)
7
Filed & Entered: 07/11/2014
Docket Text Motion to Retain Claims and Noticing Agent
8
Filed & Entered: 07/11/2014
Docket Text Motion (Generic)
9
Filed & Entered: 07/11/2014
Docket Text Motion to Reject
10
Filed & Entered: 07/11/2014
Docket Text Motion (Generic)
11
Filed & Entered: 07/11/2014
Docket Text Support
12
Filed & Entered: 07/11/2014
Docket Text Application for Designation as Complex Chapter 11 Case
13
Filed & Entered: 07/11/2014
Docket Text Application for Expedited Consideration of First Day Matters
14
Filed & Entered: 07/13/2014
Docket Text Notice of Appearance and Request

Disclaimer: I have no position in any stock mentioned. I have traded CRMB many times over the last few days and will continue to trade it, both short and long. I have no relationship with any parties mentioned above. This blog has a terms of use that is incorporated by reference into this post; you can find all my disclaimers and disclosures there as well.

Jul 11

More evidence that Windstream Technologies $WSTI is a scam

Over the last few days there have been a number of SeekingAlpha articles by multiple authors on Windstream Technologies. And this new batch of articles makes the company look very, very bad.

WindStream Technologies – A Walk Down Due Diligence Lane (July 8)
WindStream Technologies – Crashed But Still Overvalued? (July 9)
Windstream Rebuttal To GeoInvesting Report Unimpressive (July 9)

See my previous blog post on WSTI’s use of Photoshop and my initial blog post about the stock promotion.

Meanwhile, WSTI stock keeps bouncing back up, punishing shorts.

wsti

Disclaimer: I have no position in any stock mentioned. I have no relationship with any parties mentioned above. This blog has a terms of use that is incorporated by reference into this post; you can find all my disclaimers and disclosures there as well.

Jun 27

Windstream Technologies $WSTI: Who needs a test installation when you have Photoshop?

I highly recommend following @AuspexResearch on Twitter if you trade Windstream Technologies (WSTI). Here is one of his tweets:

 

I looked and what do you know, the photo on page 20 of WSTI’s most recent 10-K the photo of their product installed on a highway is in fact a Photoshopped photo from a random website from an old man who likes to walk around Sydney and take pictures of his walks.

[Edit 28 June 2014: I just wanted to clarify that @AuspexResearch is the one who found the use of Photoshop and pointed me to the website that the image came from -- I am just bringing more attention and a longer explanation to what he pointed out on Twitter.]

First we have his photo:

artarmon-freeway-path-n

Then WSTI’s photo:

0001493152-14-001106_IMAGE_012

It is hard to tell that the photos are identical at first because of the vastly different sizes and the poor quality of the WSTI photo, but look at the cars: they are all the same.

While WSTI doesn’t explicityly state that the photo above is an actual installation, it doesn’t state that it is an artist’s rendition either, and an investor could be easily confused and think that the photo is an actual test installation:

WindStream will deploy its highway version of the TurboMill ® technology in parallel with its current marketing focus of Municipalities and light industry. In doing so, the Company has secured pilot test sites that will benefit from the installation of the TurboMill ® system. (see appendix) These pilot installations will enable WindStream to collect valuable data that will be used to drive additional sales and installations of this new energy platform.

Once this pilot has been undertaken and if successful, the Company will target other States, Countries, Utilities and Government institutions to market this new energy harvesting system and expand its reach and use cases. Just as vehicle draft on highways can drive TurboMills ® so can vehicles in tunnels (the Chunnel-26 miles in length), subway systems, trains, and rail systems.

See my previous blog post on the WSTI promotion. Also see The Deal article about it.

[Edit 2014-7-2]: I highly recommend reading the GeoInvesting blog post on WSTI today and how they blatantly photoshopped their product onto an Ikea store:

ikea

Disclaimer: I have no position in any stock mentioned. I have no relationship with any parties mentioned above. This blog has a terms of use that is incorporated by reference into this post; you can find all my disclaimers and disclosures there as well.

Jun 24

Virtus Oil $VOIL Stock promotion

This morning prior to the market open I received an email from Marketing@insiderwealthalert.com linking to http://virtusoilandgas-news.com/index1.html

See the Promotion Stock Secrets report on VOIL.

 

Disclosed budget: Not disclosed
Promoter:  Charles Moskowitz
Paying party: YXIME Partners Ltd.
Shares outstanding: 48,300,000
Previous closing price: $0.92
Market capitalization: $44 million

buy-now-l

voil

 

Excerpt from disclaimer:

IMPORTANT NOTICE AND DISCLAIMER: This stock profile should be viewed as a paid advertisement. The publisher, Charles Moskowitz dba The Moskowitz Report, understands that in an effort to enhance public awareness of Virtus Oil & Gas Corp. and its securities through the distribution of this advertisement, YXIME Partners Ltd. paid all of the costs associated with creating, printing and distribution of this advertisement. The publisher was paid the sum of $5000 for his contributions.

Full disclaimer:

IMPORTANT NOTICE AND DISCLAIMER: This stock profile should be viewed as a paid advertisement. The publisher, Charles Moskowitz dba The Moskowitz Report, understands that in an effort to enhance public awareness of Virtus Oil & Gas Corp. and its securities through the distribution of this advertisement, YXIME Partners Ltd. paid all of the costs associated with creating, printing and distribution of this advertisement. The publisher was paid the sum of $5000 for his contributions. If successful, this advertisement will increase investor and market awareness, which may result in increased numbers of shareholders owning and trading the common stock of Virtus Oil & Gas Corp., increased trading volumes, and possibly increased share price of the common stock of Virtus Oil & Gas Corp.. The publisher has not undertaken to determine if YXIME Partners Ltd. is, or intends to be in the future, directly or indirectly, a shareholder of Virtus Oil & Gas Corp.. The publisher may receive revenue, the amount of which cannot be determined to any degree of certainty, as a result of this advertising effort and the accompanying subscription offer. This publication is not, and should not be construed to be, an offer to sell or a solicitation of an offer to buy any security. This publication, its publisher, and its editor do not purport to provide a complete analysis of any company’s financial position. The publisher and editor are not, and do not purport to be, broker-dealers or registered investment advisors. Any investment should be made only after consulting a professional investment advisor and only after reviewing the financial statements and other pertinent corporate information about the company. Further, readers are advised to read and carefully consider the Risk Factors identified and discussed in the advertised company’s SEC filings. Investing in securities, particularly micro cap securities such as Virtus Oil & Gas Corp., is speculative and carries a high degree of risk. Past performance does not guarantee future results. This publication is based exclusively on information generally available to the public and does not contain any material, non-public information. The information on which it is based is believed to be reliable. Nevertheless, the publisher cannot guarantee the accuracy or completeness of the information. This publication contains forward-looking statements, including statements regarding expected continual growth of the featured company and/or industry. The publisher notes that statements contained herein that look forward in time, which include everything other than historical information, involve risks and uncertainties that may affect the company’s actual results of operations. Factors that could cause actual results to differ include the size and growth of the market for the company’s products and services, the ultimate degree of success in the company’s drilling excursions, the company’s ability to fund its capital requirements in the near term and long term, pricing pressures, etc. The Moskowitz Report is a trademark of Charles Moskowitz. All other trademarks used in this publication are the property of their respective trademark holders. The Moskowitz Report and Charles Moskowitz are not affiliated, connected, or associated with, and are not sponsored, approved, or originated by, the trademark holders unless otherwise stated. No claim is made by The Moskowitz Report or Charles Moskowitz to any rights in any third-party trademarks. – !

PDF copy of pump page

Disclaimer: I have no position in any stock mentioned above. I have no relationship with any parties mentioned above. This blog has a terms of use that is incorporated by reference into this post; you can find all my disclaimers and disclosures there as well.

Jun 23

Windstream Technologies $WSTI gets a Wall Street Revelator pump

Starting last Friday people on Twitter started reporting receiving hard mailers promoting Windstream Technologies (WSTI). So far there has been no email or online promotion of the stock that I am aware of. I posted on Twitter a few times about the promotion; Tim Sykes blogged about it earlier today. Considering the high stock price and large market cap and relatively high volume I think it very likely that this pump will dump big within the next week.

Disclosed budget: $900,000
Promoter:  Mandarin Media / Wall Street Revelator / Andrew Carpenter
Paying party: ???
Shares outstanding: 84,972,578
Previous closing price: $1.45
Market capitalization: $123 million

wsti

 

 

wsti

 

 

Excerpt from disclaimer:

Mandarin Media Limited paid nine hundred thousand dollars to marketing vendors to pay for all the costs of creating and distributing this Advertisement, including printing and postage, in an effort to build investor and market awareness.

Mandarin Media Limited was paid by non-affiliate shareholders who fully intend to sell their shares without notice

Full disclaimer:

wsti_disclaimer wsti-2-copy-576x1024

Disclaimer: I have no position in any stock mentioned. I have no relationship with any parties mentioned above. This blog has a terms of use that is incorporated by reference into this post; you can find all my disclaimers and disclosures there as well.

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