In early 2012 a pre-promotion stock trading service called First Microcap Report, run by Leslie Howard, advertised on PumpsandDumps.com. Howard achieved some traction although his research wasn’t particularly good and while I followed him and he did sometimes have useful insights, I certainly didn’t go about recommending him. I suppose he didn’t find enough people interested in his pre-promotion trading service or he didn’t make enough money trading his alerts, because in late May 2012 he took money to promote Biostem Corp (HAIR). He continued to promote HAIR for months.
Around the same time, Michael Osborne, a convicted felon and frequent target of litigious penny stock gadfly George Sharp, posted on the AbuseofLaw.org website allegations that Sharp not only ran Pumpsanddumps.com but was also Leslie Howard. I did not post those allegations on my blog for a couple reasons: Sharp was only a minor figure in the penny stock world after suing a couple penny stock companies, and the evidence was circumstantial only. I was not surprised when Sharp won a libel lawsuit against Osborne and that appeared to vindicate my earlier decision.
Yesterday a poster on Investorshub pointed out a lawsuit filed in August by Market Broadcast LLC and George Sharp against HAIR and its executives (and others). This proved the earlier accusations that Osborne had made (although I do remember that he made a bunch of other allegations as well and those may have been false). I looked at the court docket and downloaded the initial complaint myself.
From the complaint:
1. At all times mentioned herein, Plaintiff Market Broadcast, LLC (“MARKET”)
was a Nevada Limited Liability Corporation with offices in Ft. Lauderdale, Florida and La Jolla,
California. The Plaintiff is in the business of bringing investor awareness to public companies.
2. At all times mentioned, Plaintiff George Sharp (“SHARP”) was the managing
member of Plaintiff MARKET, and SHARP has become recognized internationally as a crusader
against penny stock fraud and has been loudly applauded for his efforts.
Later in the complaint, Sharp discloses the payment he agreed to receive for promoting HAIR; a copy of that stock promotion agreement is attached to the end of the complaint linked above.
The AGREEMENT required the Plaintiff SHARP to be paid 300,000 free-trading
shares at the time that the investor awareness program began. The shares issued to the plaintiff
did not become free-trading until July 10, 2012, when the shares were already trading at a 42%
discount from the high share price achieved during the investor awareness campaign.
Related to this lawsuit, some Biostem insiders and financiers were arrested by the FBI in February for conspiring to manipulate Biostem and other stocks. Sharp was not sued by the SEC nor was he arrested. I really don’t understand why he filed the lawsuit at all — his chance of recovering any money has to be very low with the Feds involved.
One of the more interesting things about this lawsuit is that First MicroCap Report LLC was always disclosed as the owner / publisher of FirstMicroCapReport.com, not Market Broadcast LLC. Yet the promotion contract with HAIR was with Market Broadcast LLC, not First Microcap Report LLC. I can think of no legitimate reason why Sharp used two different LLCs for his stock promotion business.
What should we conclude from this? Simple: don’t trust anyone, especially not in the penny stock world. Does this mean that Sharp’s lawsuits against various promoters and penny stocks will no longer affect the prices of those stocks? No. Does this make him much less likely to win his various lawsuits? Probably not. But anyone who held Sharp in high regard will be much less likely to do so now.