LifeQuest World Corp (LQWC) is the newest 7Stocks stock promotion & just got ☠

Important disclosure: I am currently short LQWC and will profit if it drops. See bottom for full disclosure.

Just three days ago I wrote about the drop in Vaccex (VCEX) after it was designated ‘caveat emptor’ by OTCMarkets. VCEX was promoted by 7 Stocks LLC. Around the end of the VCEX promotion 7 Stocks LLC started promoting LQWC using search engine ads linking to the website 7Stocks.com/featured. After the market close yesterday LQWC was also designated ‘caveat emptor’ by OTC Markets.

Sample Google search ad:

Screenshot of promotion page:

Disclosed budget: $50,000
Promoter:  7 Stocks LLC
Paying party:  Antevorta Capital Partners Ltd
Shares outstanding:  85,294,700 
Unrestricted shares: 4,096,208
Previous closing price: $1.22
Market capitalization: $104 million

Disclaimer:

We are paid to advertise the Profiled Issuer (LQWC). 7stocks.com is owned by 7 Stocks, LLC and has been compensated $50,000 by Antevorta Capital Partners LTD. for a period beginning on July 9, 2019 and ending July 30, 2019. We will update any changes to our compensation. We own zero shares of (LQWC)

While I don’t often discuss the fundamentals of companies that are undergoing pump and dumps because they are almost always unbelievably bad, I would be remiss if I didn’t point out that LQWC reported absolutely no assets in its most recent quarterly report:

As I wrote in my post about VCEX, 7Stocks LLC is a Wyoming LLC with no information about its owners publicly available, which was registered on December 8, 2018. Just like with the promotion of VCEX the promotion was paid for by Antevorta Capital Partners Limited.

Antevorta Capital Partners Ltd’s UK company registration shows that it was incorporated on November 21, 2018. The one officer listed is Julius Charles Csurgo (Director), and his correspondence address is in Hungary: U 3/12, Pecs Bajcsy-Zsililnsky, Endre U, Hungary, 7622. Julius Csurgo’s LinkedIn profile lists him as a partner at Antevorta Capital Partners Limited from 2011 to the present. He is also listed as Managing Director of Merger Law Associates Ltd since 2005 and Director and CEO of Go Green Group Limited.

Antevorta Capital Partners Ltd. is mentioned only a handful of times in SEC filings. It is mentioned in the 5/7/2018 SEC Form 1-A of Deep Green Waste & Recycling, the 4/17/2017 10-K of Atacama Resources International, the 4/15/2015 10-K filed by Textmunication Holdings Inc, and an 8-K (4/17/2014) and an 8-K/A (12/3/2013) from Mobiagogo, Inc. Julius Csurgo is mentioned only twice in SEC filings, the 10-K filed by Cannagistics Inc. on 3/21/2019 and the 10-K/A filed 3/15/2019.

LQWC daily candlestick stock chart:

Disclaimer: I am currently short LQWC. This means that I will profit if the stock drops. I intend to hold the short for weeks if necessary. I may add to the position or cover it at any time. I have no position in any other stock mentioned. I have no relationship with any parties mentioned above except that I am a paying subscriber to OTC Market Research. 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.

Another boiler room pump bites the dust, this time without help from the SEC

The last four days have not been kind to investors in Biohemp International inc (BKIT). On July 12, 2019 it closed at $1.9425; with 28.85 million shares outstanding, it had a market cap of $56 million. Today it closed at $0.17, down over 90% from its highs.

BKIT has reportedly been the subject of a boiler room stock promotion. Here are a couple comments on BKIT’s Yahoo Finance message board:

Also, a short seller of pump and dumps that I know and respect posted one of the phone numbers used by the boiler room:

Of all the kinds of stock promotion, boiler room pumps are the hardest to identify because there is no public record of the phone calls, no emails, no websites, and no advertisements online (although some boiler room promotions also involve email and landing page promotion as well). At the present time, with SEC Enforcement acting aggressively, going under the radar is the best bet for promoters. This promotion even stayed out of sight of OTC Markets, which does not even have it marked as being a promoted stock.

Here is a screenshot from the OTCMarkets website on BKIT:

While BKIT dumped before the regulators came calling, the SEC did recently suspend trading in multiple boiler room pump and dumps that were all connected.

In addition to the boiler room pump, BKIT also had a paid analyst research note with Ludlow Research, which was paid $2,300 for “on-going media advisory services”. I encourage you to read the note (pdf) if you want a good laugh.

Update 2019-7-19: OTC Market Research just made their research report on BKIT publicly available. Read it.

Disclaimer: I have no position in any stock mentioned. I have no relationship with any parties mentioned above except that I am a paying subscriber to OTC Market Research. 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.

OTCMarkets continues handing out Caveat Emptor ☠ designations like candy: VCEX, BETW, and ELGL

On July 9, 2019, after the market close, OTCMarkets.com designated three stocks as ‘Caveat Emptor’ (buyer beware; also known as the skull and crossbones for the emoji they use). I previously wrote about how poorly many recent stock promotions have performed after receiving the caveat emptor designation. I will continue to keep updating people on this topic.

The three stocks that were designated caveat emptor were Vaccex Inc (VCEX), Bettwork Industries Inc (BETW), and Element Global (ELGL).

Element Global was unknown to me until it was marked caveat emptor. Judging by the chart it had some sort of promotion or manipulation in May; in June it put out several press releases. The stock closed at 0.36 on July 9th and on the third trading day after being designated ‘caveat emptor’ (July 12th) it closed at $0.1648. With 249 million shares outstanding it still has a significant market cap of $55 million as I write this.

Bettwork Holding (BETW) is the only one of these three stocks that is above where it was before the caveat emptor designation. It closed at $0.6655 on July 9th, gapped down but then recovered the next day, and has continued to rise on light volume. BETW was promoted by PennyPickNewsletter.com (and possibly by other websites controled by the promoter behind it). OTC Market Research has referred to this promoter as the “Tier 1” promoter because they move stocks but keep changing which websites they use and use fake names in all their disclaimers. That BETW has kept rising is not that surprising to me — the only other recent promotion that kept rising after being designated ‘caveat emptor’ was another “Tier 1” pump, Kalmin Corp (KLMN). At a current price of $0.76, BETW has a market cap of $32 million.

I am short BETW (see full disclaimer at bottom).

The third stock that was designated caveat emptor on July 9th was Vaccex (VCEX). Vaccex had been promoted via an online landing page at https://thepublicmarkets.com/heres-why-otc-vcex-is-the-must-see-stock-of-the-year-the-timing-couldnt-be-better/. At some point on the second trading day after the caveat emptor designation (July 11th), that landing page was taken down. I was just about to blog about the promotion (after having just come back from vacaction) and had not yet saved a copy of the landing page. Thankfully, Archive.org had already archived the promotion page.

VCEX gapped down big after the caveat emptor designation and then dropped precipitously the second day and dropped more the third and fourth days. I was lucky enough to have just shorted VCEX on July 9th right before the caveat emptor. I covered at around $0.38. At a current price of $0.30, VCEX has a market cap of $15 million.

Disclaimer from VCEX landing page:

We are paid to advertise the Profiled Issuer (VCEX). thepublicmarkets.com is owned by 7 Stocks, LLC and has been compensated $100,000 by Antevorta Capital Partners LTD. for a period beginning on June 24, 2019 and ending July 22, 2019. We will update any changes to our compensation. We own zero shares of (VCEX)

Per the full disclaimer page at the website, it is owned and run by 7 Stocks LLC, a Wyoming LLC. It was initially registered on December 8, 2018 (filing # 2018-000831874). The company was registered by Cloud Peak Law Group with an employee of that firm listed as an ‘Authorized Individual’.

Disclaimer: I am currently short BETW. I intend to hold the short for weeks if necessary but I may cover the position at any time. I have no position in any other stock mentioned. I have no relationship with any parties mentioned above except that I am a paying subscriber to OTC Market Research. 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.

SEC Brings the Suspensions to many pump & dumps the one week I’m on vacation

Last week (the week of July 1st, 2019) was my first real ‘don’t even bother to look at your laptop to check stock prices during market hours’ vacation in two years. I took an Alaskan cruise and enjoyed seeing the sights (if you are ever in Ketchikan, Alaska, make sure to go snorkeling with Snorkel Alaska). So naturally the SEC decided that would be a good time to hand out more trading suspensions of active and recent pump and dumps in one week than it had done in years.

First, make sure to take a look at the article on the suspension by my friends at OTC Market Research: SEC Targets Boiler Room promoter. I will not repeat what they wrote (read it yourself!) except to list the stocks:

Anvia Holdings Corp (ANVV) was suspended on 2019-6-27 (PR | order)

Natural Health Farm Holdings (NHEL) was suspended on 2019-6-28 (PR | order). I wrote about the boiler-room pump & dump of NHEL on March 18, 2019.

Korver Corp (KOVR) was suspended on 2019-6-28 (PR | order)

Apotheca Biosciences Inc (CBDC) was suspended on 2019-6-28 (PR | order)

Befut Global (BFTI) was suspended on 2019-6-28 (PR | order)

Besides the above companies that were written about at OTC Market Research, the SEC also suspended trading in two stocks that are not connected with the others: Blue Eagle Lithium (BEAG) was suspended on July 1, 2019 and Upper Street Marketing Inc (UPPR) was suspended on June 27, 2019.

I previously wrote about the mailer promotion of BEAG on June 25, 2019. Read the SEC press release (pdf) and suspension order (pdf). BEAG will resume trading at the open on July 17, 2019. The reason given for the suspension (from the PR):

questions regarding (i) the accuracy and adequacy of publicly available information in the marketplace, since at least May 22, 2019, about the company, including statements in online promotional materials regarding analyst findings and the extent of the company’s mining claims; and (ii) recent unusual unexplained market activity in Blue Eagle Lithium, Inc.’s common stock.

Trading in Upper Street Marketing Inc. (UPPR) was suspended by the SEC on June 27, 2019. The stock will resume trading at the open on July 15, 2019. See the SEC press release (pdf) and the suspension order (pdf). The reasons given for the trading suspension are (surprisingly) quite specific:

questions about the accuracy and adequacy of information publicly disseminated concerning UPPR, including, among other things: (1) public statements by UPPR dated May 8, 2019 and May 23, 2019 concerning $10.55 million worth of purported financing for UPPR; (2) public statements by UPPR dated April 30, 2019 and May 23, 2019 denying its retention of an investor relations firm despite apparent possible promotional activity on behalf of UPPR; and (3) inadequate statements, since at least November 2018, concerning a possible private offering of at least $3 million dollars in UPPR’s common stock.

Oddly, I found no PRs or other public statements from the company on the dates listed in the SEC suspension release or even with the specific topics mentioned in the SEC release. I searched OTCMarkets.com, GlobeNewswire, and http://upperstreetmarketing.com, https://twitter.com/Growing_Springs, and https://www.facebook.com/GrowingSprings.



Disclaimer: I have no position in any stock mentioned. I have no relationship with any parties mentioned above except that I am a paying subscriber to OTC Market Research. 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.

OTCMarkets Group brings the ☠ hurt to some high-profile pump & dumps

A number of recent pump and dumps have been tagged with the “Caveat Emptor” (also known as the skull and crossbones ☠) designation by OTCMarkets.com. Below I have indicated on the stock charts when each stock was given the Caveat Emptor designation. For the most part, pumps marked with ☠ have quickly dropped and stayed down. Besides the negative publicity of the Caveat Emptor designation, it also has some deeper effects that have caused promoters to abandon tickers given the Caveat Emptor. Unfortunately I cannot yet publish the evidence I have for this conclusion. I do intend to explain this in a follow-up post, hopefully in a few months.

A list of stocks with the most recent addition or removal of Caveat Emptor status can be found at https://www.otcmarkets.com/market-activity/compliance-statistics. See OTCMarkets’ policy on when a stock gets marked Caveat Emptor. Follow their Twitter account for notifications of Caveat Emptor designation. A handy time-sorted list of only relevant tweets by @OTCMarkets is here. Unless otherwise noted, stocks were given the Caveat Emptor designation after the market close. Do note that when trading is suspended in a stock it automatically receives the Caveat Emptor; those cases are not interesting to me because the trading suspension by the SEC is the more important action. I have also excluded illiquid and subpenny stocks from the list below. I have tried to be thorough but let me know if I have missed any stocks.

A few stocks have been notable to me and the folks at OTC Market Research for not getting designated Caveat Emptor. Among those are long-time landing page promotion NUGL (which isn’t even marked as a paid promotion), BEAG (landing page and now a mailer pump), boiler-room pump NHEL from two months ago, and current boiler-room pump BKIT.

White Label Liquid Inc (WLAB): Caveat Emptor 6/19/2019

CLIC Technology Inc (CLCI): Caveat Emptor 6/17/2019

Antilia Group Corp (AGGG): Caveat Emptor 6/7/2019 (midday — I reported it in chat at 1:07pm Eastern but stock had already dropped a lot by then)

Frelii (FRLI): Caveat Emptor 5/22/2019

Bionovate Technologies Corp (BIIO): Caveat Emptor 5/8/2019

Perkins Oil & Gas (OOIL): Caveat Emptor 4/8/2019. Exactly one month later on 5/8/2019 the SEC suspended trading in the stock. The reason given in the order (pdf) was “because of concerns regarding the accuracy and adequacy of information in the marketplace, including statements by third-parties about OOIL’s assets and valuation.”

Kalmin Corp (KLMN): Caveat Emptor 1/31/2019 — This is the one promotion that held up the best after the CE designation, gapping down but then recovering completely on the second day after receiving the skull and crossbones.

Corrections & Clarifications
2019-7-9 Title changed to remove OTCMarkets Group CEO’s name (Cromwell Coulson) and replace it with ‘OTCMarkets Group’
2019-7-10 Info on trading suspension of OOIL added.

Disclaimer: I am short FRLI and have no position in any other stock mentioned. I have no relationship with any parties mentioned above except that I am a paying subscriber to OTCMarket Research. 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.

Blue Eagle Lithium (BEAG) is the newest mailer pump & dump

Blue Eagle Lithium is reportedly being promoted via a mailer (at least according to two posters on Investorshub). There is also a corresponding online landing page (https://independentlivingnews.com/LithiumProfits/). It had already been promoted off and on via a landing page that had also promoted FRLI and YVR (https://thenextbigthing.com/2018/02/08/is-this-changing-the-game-in-tech/). To keep up with landing page promotions, I suggest frequently visiting the OTC Market Research Landing Page tracker page.

Screenshot from promotion page:

Disclosed budget: $1,345,452
Promoter:  Off-Grid Confidential
Paying party:  Pinnacle Media Ltd.
Shares outstanding:  76,483,855
Free float: 35,000,000
Previous closing price: $1.34
Market capitalization: $102 million

Daily stock chart:

Unfortunately, while BEAG has not been tagged with the Caveat Emptor by OTCMarkets, it is blocked from trading by my main broker, Interactive Brokers (likely because of the stock promotion and the fact that it is a shell). If it weren’t, I would be short already and looking to profit from the coming dump.

Landing page disclosure:

IMPORTANT NOTICE AND DISCLAIMER: All investments are subject to risk, which must be considered on an individual basis before making any investment decision. Off-Grid Confidential is an investment newsletter which is also being advertised herein. This paid advertisement includes a stock profile of Blue Eagle Lithium Inc., (BEAG). This paid advertisement is intended solely for information and educational purposes and is not to be construed under any circumstances as an offer to buy or sell, or as a solicitation to buy or sell, any securities. In an effort to enhance public awareness of Blue Eagle Lithium Inc. and its securities, Pinnacle Media Ltd. (Payor) provided advertising agencies with a total budget of approximately one million, three hundred forty-five thousand, four hundred fifty two dollars to date to cover the costs associated with creating, printing and distribution of this advertisement. Blue Eagle Lithium Inc. was chosen to be profiled in this advertisement after Off-Grid Confidential conducted an investigation of the company and its management. Off-Grid Confidential was paid thirty five thousand dollars as a research fee and two thousand, two hundred thirty dollars in travel expenses. In addition, Off-Grid Confidential may receive subscription revenue in the future from new subscribers as a result of this advertisement. The advertising agencies will retain any excess sums after all expenses are paid. As of the date these materials are disseminated, neither the advertising agencies nor Off-Grid Confidential nor any of their respective officers, principals or affiliates (as defined in the Securities Act of 1933, as amended, and Rule 501(b) promulgated thereunder) own or beneficially own any securities of Blue Eagle Lithium Inc. Neither the advertising agencies nor Off-Grid Confidential or any of their respective officers, principals or affiliates will purchase or receive any securities of Blue Eagle Lithium Inc. for a period of ninety (90) days following the date this advertising campaign is concluded. The Payor has represented in writing to Off-Grid Confidential and the advertising agencies that neither the Payor nor any of its officers, directors, principals or affiliates (as defined in the Securities Act of 1933, as amended, and Rule 501(b) promulgated thereunder) owns or beneficially owns, and that they are not acting on behalf of any person who owns or beneficially owns, any securities of Blue Eagle Lithium Inc. or will purchase or receive any securities of Blue Eagle Lithium Inc. for a period of ninety (90) days following the conclusion of this advertising campaign. If successful, this advertisement will increase investor and market awareness, which may result in an increased number of shareholders owning and trading the securities of Blue Eagle Lithium Inc., increased trading volume, and possibly an increased share price of Blue Eagle Lithium Inc. securities, which may be temporary. This advertisement, the advertising agencies and Off-Grid Confidential do not purport to provide a complete analysis of Blue Eagle Lithium Inc.’s financial position. They are not, and do not purport to be, broker-dealers or registered investment advisors. This advertisement is not, and should not be construed to be, personalized investment advice directed to or appropriate for any particular investor. Any investment should be made only after consulting a professional investment advisor and only after reviewing the financial statements and other pertinent publicly-available information about Blue Eagle Lithium Inc. and its industry. Further, readers are specifically urged to read and carefully consider the Risk Factors identified and discussed in Blue Eagle Lithium Inc.’s SEC filings. Investing in micro cap securities such as Blue Eagle Lithium Inc. is speculative and carries a high degree of risk. Past performance does not guarantee future results. This advertisement 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 advertising agencies and Off-Grid Confidential cannot guarantee the accuracy or completeness of the information and are not responsible for any errors or omissions. This advertisement contains forward-looking statements, including statements regarding expected continual growth of Blue Eagle Lithium Inc. The advertising agencies and Off-Grid Confidential note that statements contained herein that look forward in time, which include everything other than historical information, involve risks and uncertainties that may affect Blue Eagle Lithium Inc.’s actual results of operations. Factors that could cause actual results to differ include the size and growth of the market for Blue Eagle Lithium Inc.’s products and/or services, the company’s ability to fund its capital requirements in the near term and long term, pricing pressures, etc. Off-Grid Confidential is the publisher’s trademark. All trademarks used in this advertisement other than Off-Grid Confidential are the property of their respective trademark holders and no endorsement by such owners of the contents of this advertisement is made or implied. The advertising agencies and Off-Grid Confidential 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 to any rights in any third-party trademarks.

Disclaimer: I have no position in BEAG. I have no relationship with any parties mentioned above except that I am a paying subscriber to OTCMarket Research. 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.

NUGL Inc (NUGL) long-time online landing page pump & dump

Somehow I forgot to write about the longest landing-page stock promotion currently ongoing and one of the longest I can remember. I came across a Google search advertisement that linked to the landing page promoting NUGL ( http://hotteststockpicks.com/) a week ago and that reminded me to record the promotion. Another landing page with the same content is at http://2019stockpicks.com/nugl/. This stock has traded significantly more volume than any other recent pump and dump that I can think of.

If you wish to follow current landing page promotions, bookmark this page at OTCMarket Research.

A couple random notes: OTCMarkets has not tagged NUGL with the ‘stock promotion’ flag despite the ongoing promotion. The landing page disclaimer does not disclose who paid for the promotion.

Screenshot of landing page:

Disclosed budget: $1,956,356.64
Promoter:  hotteststockpicks.com
Paying party:  Not disclosed
Shares outstanding: 46,437,284
Free float: 17,175,161
Previous closing price: $0.94
Market capitalization: $42 million

Landing page disclaimer:

THIS IS A PAID ADVERTISEMENT BY AN INVESTMENT PUBLISHER. OUR PUBLICATIONS ARE BIASED OPINIONS. PLEASE READ THE FOLLOWING IMPORTANT LEGAL, SECURITIES, AND FORWARD-LOOKING STATEMENT DISCLOSURES BEFORE MAKING ANY DECISION TO PROCEED.
American Signal is a pseudonym of hotteststockpicks.com. This is a paid advertisement and all individuals should verify all claims and perform their own due diligence on NUGL (and any other mentioned public companies), and read this disclaimer in its entirety. The webpage and the NUGL profile is not a solicitation or a recommendation to buy, sell or hold securities. hotteststockpicks.com is a publisher. We have been compensated $1,956,356.64 for advertising and promotional services related to NUGL starting Dec 10 2018. We own 0 shares of NUGL. We are not registered as a securities broker/dealer or an investment advisor either with the U.S. Securities and Exchange Commission or with any state securities regulatory authority. Our Service is intended to provide opinions and analysis of stocks and markets, but is not intended to provide personalized investment advice. DO NOT E-MAIL, CALL, WRITE TO OR OTHERWISE CONTACT hotteststockpicks.com SEEKING PERSONALIZED INVESTMENT ADVICE, WHICH CANNOT BE PROVIDED. By using our Services, you understand that the material provided by our Service is for general informational purposes only. No information on the hotteststockpicks.com as a part of our Service constitutes a recommendation that any particular investment, security, portfolio of securities, transaction or investment strategy is suitable for any specific person.
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Disclaimer: I have no position in NUGL. I have no relationship with any parties mentioned above except that I am a paying subscriber to OTCMarket Research. 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.

SEC Suspends trading in Profile Solutions Inc (PSIQ)

This morning prior to the market open the SEC announced the suspension of trading of Profile Solutions Inc (OTC: PSIQ). The stock will resume trading on the grey market (no market makers) at the open on July 2nd, 2019. The reason given for the suspension is the usual boilerplate of “because of questions that have been raised about the accuracy and adequacy of information in the marketplace relating to PSIQ common stock. In the order, the SEC more clearly specified reasons for the suspension:

It appears to the Securities and Exchange Commission that there is a lack of current and accurate information concerning the securities of Profile Solutions, Inc. (CIK No. 0001080637) because of questions that have arisen regarding the adequacy and accuracy of assertions by Profile Solutions, Inc., a Delaware corporation with its principal place of business in Sunrise, Florida, in its registration statement, as amended, filed on Form S-1 dated March 5, 2019 and in multiple press releases concerning, among other things, its revenues, agreements and distribution contracts, and the possible role of undisclosed control persons in the company.

SEC suspension order

SEC suspension release (pdf)
SEC suspension order (pdf)

PSIQ has not moved much as a result of those press releases. The stock has had light trading volume over the last six months, averaging maybe $20,000 of trading per day.

PSIQ daily chart over last 6 months (click to embiggen)

Disclaimer: No position in any company 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.

Wilson-Davis settles with SEC for failures to file SARs

On May 15, 2019 the SEC announced a settlement (pdf) with microcap broker Wilson-Davis & Co. for failing to file suspicious activity reports (SARs) about suspicious activity by its clients.

I have written about Wilson-Davis before, most recently in April 2018 about the FINRA OHO Hearing Panel decision against the firm for improper short sales, failures to supervise, and inadequate anti-money-laundering (AML) procedures (currently being appealed; I expect the FINRA National Adjudicatory Council to rule within a few months). Previous, in April 2017 I wrote about a Wilson-Davis settlement with the SEC for Reg SHO violations.

Securities lawyer Laura Anthony described Wilson-Davis in 2016 as one of “only a limited number of clearing brokers” willing to clear penny stocks. Since that time, one of the other clearing brokers mentioned by Anthony, Cor Clearing, agreed in a September 2018 settlement with the SEC to stop accepting the deposit of penny stocks.

Here is the description of Wilson-Davis & Co. from the settlement:

Wilson is a registered broker-dealer located and organized in Utah. It has satellite offices in Colorado, Florida, Arizona, New Jersey, New York, and California. It has been registered with the Commission since 1968, has approximately 7,000-8,000 active customer accounts, and has approximately thirty-two registered representatives. Wilson’s primary business is the liquidation of microcap stocks and is a market-maker in approximately fifty securities.

page 2

There were many failures to file SARs, even in cases where Wilson-Davis closed accounts because of suspicious activity.

9. Although Wilson’s WSPs identify suspicious activity, list red flags, and describe Wilson’s responsibility to file SARs, Wilson failed to adequately conduct AML reviews and to identify, investigate, and report certain suspicious activity related to transactions or patterns of
transactions in its customers’ accounts. Accordingly, Wilson failed to file necessary SARs.

10. Wilson’s primary business involves receiving stock in physical form, selling the position, and wiring out the proceeds from the transaction. Although this pattern is a red flag of potentially suspicious activity according to Wilson’s WSPs, Wilson often failed to investigate or
to file SARs where necessary on these types of transactions.

11. Wilson failed to investigate or file SARs on numerous transactions in which Wilson’s customers exhibited the red flag pattern of depositing a physical certificate, liquidating shortly after the deposit, and wiring the proceeds.

12. In several instances the conduct reached such a level that Wilson froze or even closed the customer accounts. Even when the suspicious activity caused Wilson to close an account, it never filed a SAR.

page 4

The SEC’s descriptions of the details of deposits and sales of stock in three different companies (referred to as Issuers A, B, & C) are mind-blowing. Below are just the red flags associated with Issuer A:

13. From March 2014 to June 2016 (“relevant Issuer A period”), at least fifty-two different Wilson customers deposited approximately 576,540,673 shares of Issuer A. Many of these customers then liquidated 263,641,501 shares during the same period and wired out the proceeds. Issuer A’s CEO also maintained an account at Wilson.

14. During the relevant Issuer A period, the Commission filed an action against a Wilson customer for manipulating several stocks, including Issuer A. The Commission alleged that from January 24 through February 12, 2014, there was an active promotional campaign involving Issuer A. From January 24, 2014 through February 12, 2014, while the suspicious transactions were taking place, Issuer A’s stock price increased by 573%. Although the Commission’s complaint did not allege the manipulative conduct occurred at Wilson, a Wilson registered representative became aware of the Commission action when a customer emailed him an article discussing the SEC action on August 6, 2014. The registered representative notified the Wilson AML officer of the SEC action.

15. In early 2015, Wilson became aware of a news article that said Issuer A’s CEO and others sold shares of Issuer A through Wilson and broker-dealer B. Wilson requested brokerdealer B statements from Issuer A’s CEO and the other Wilson customers accused of selling. Wilson verified that Issuer A’s CEO and others sold Issuer A through broker-dealer B at the same time as selling at Wilson. Wilson immediately froze the accounts for any transactions in Issuer A. Issuer A’s CEO and others had signed a Wilson form at the time of each Issuer A deposit providing that they would not be permitted to sell Issuer A shares at another firm while also selling shares through Wilson.

16. In October 2015 Wilson’s compliance department told a customer it wanted a new attorney to draft opinion letters regarding Issuer A. Wilson had concerns because of the quality of the attorney opinion letters and because of the approximately sixty-seven deposits of Issuer A securities, this attorney authored fifty-eight attorney opinion letters from thirty-four different Wilson customers. Wilson told the customer that Wilson wanted a new attorney with more of an “arm’s length away from the company.”

17. In 2016, the Commission filed an action alleging that Issuer A and Issuer A’s CEO, among others, perpetrated a scheme to evade the antifraud and registration provisions of the federal securities laws. Wilson sent its customer an email saying that due to the SEC complaint, Wilson would not allow sales or deposits of Issuer A securities. Before filing its action, the Commission had sent ten document requests to Wilson regarding approximately ten customer accounts trading Issuer A securities. Wilson eventually determined the conduct to be concerning enough to close all accounts of the individuals named in the Commission’s complaint. Wilson also closed the accounts of family members and several employees of Issuer A.

18. Although many of Wilson customers engaged in transactions of $5,000 or more involving Issuer A that exhibited the red flag activity described above of depositing physical certificates, liquidating the shares, and wiring the proceeds, Wilson never filed a SAR in regard to customer transactions involving in Issuer A. In addition, there were numerous other red flags associated with these transactions. Wilson knew the Commission filed an action alleging manipulation of Issuer A securities. Wilson knew that although several of its customers signed a document saying they would not trade shares at other firms, those customers were liquidating shares at both Wilson and broker-dealer B. Wilson was concerned enough that the same attorney was writing attorney opinion letters to tell a customer he needed to find a different attorney. Finally, Wilson believed the conduct warranted closing numerous customer accounts. Despite all of these red flags, Wilson never filed a SAR on any suspicious trading in Issuer A securities.

pages 4-6

The Punishment

The punishment for all these failures to file SARs seems to me to be really weak: a $300,000 fine and a requirement to hire a consultant and follow the consultant’s recommendations on how to prevent these sorts of failures in the future.

Correction: 2019-7-23: I corrected the date of the settlement. This post originally stated the settlement as being dated 5/15/2018, not 5/15/2019.

Disclaimer: No position in any company 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.

Frelii Inc: Online Landing page and mailer stock promotion

Marijuana stock Frelii (OTC: FRLI) has had a landing page promotion off and on for some months at TheNextBigThing.com (that landing page is currently promoting OTC stock Blue Eagle Lithium (BEAG): https://thenextbigthing.com/2018/11/20/artificial-intelligence-for-your-health-y/). (Check out this page to see all current landing page stock promotions.) On May 13th I became aware of another landing page with a purported big budget promoting the stock, when Tim Lento posted it on his blog. I then searched online for the language on that landing page (https://thehealthinvestor.com/) and found a second landing page at https://dnainvestoralerts.com/.

Below is a screenshot of the top of the first landing page:

The image below, taken from the same landing page promoting FRLI, is beyond absurd:

At least one person posted on a message board that they have received a physical mailer promotion on FRLI.

Due to how poorly pumps have done over the last couple years I started a short position in FRLI on May 7th. I planned to short more as I found more shares to short at Interactive Brokers but by the time I had found more shares to short on May 14th Interactive Brokers marked the stock as “No opening trades: Ineligible PINK stock”. IB has for over a year restricted trading of OTC stocks that are marked ‘Caveat Emptor‘ by OTCMarkets.com but this is the first time I have seen IB restrict a non-grey market OTC stock that isn’t marked Caveat Emptor. I contacted IB support to ask for an explanation and the following was the unhelpful reply:

After talking with several other traders I learned that IB had marked scores of other OTC stocks with that same trade restriction at the same time. They did not have one thing in common but it is likely that IB is looking at multiple risk flags that OTCMarkets.com is putting out (such as potential shell risk, stock promotion flag) and restricting stocks with multiple risks. CRSM and TOGL are two other such stocks restricted from trading by Interactive Brokers. OTCMarkets just recently introduced a tool for brokers and others to quantify risks of different stocks using numerous risk factors, called Canari. I think it likely that Interactive Brokers is now using that tool and restricting trading in stocks that score too high on a composite risk score.

FRLI landing page pump details:

Disclosed budget: $2,183,616
Promoter:  World Opportunity Investor / James DiGeorgia
Paying party:  TGB Media Limited
Shares outstanding: 38,974,107
Free float: 9,538,629
Previous closing price: $1.86
Market capitalization: $72 million

In addition to the landing page promotion, FRLI was promoted via email starting on May 20th by the stock promoter group that I and others believe to be associated with AwesomePennyStocks / John Babikian and that I previously referred to as FinestPennyStocks. That group has stayed relatively under the radar until recently by constantly shifting websites. However, OTCMarkets.com appears to have targeted them, marking their last three large promotions, OOIL, BIIO, and KLMN, as Caveat Emptor and helping to end those promotions. The SEC even joined the act and suspended trading in OOIL (long after the pump was over). The disclaimer from the emails promoting FRLI is shown below:

Besides the stock promotion, Frelii also made news in Canada when its CEO (an American) attended a fundraising dinner for Prime Minister Justin Trudeau. The company then put out a misleading press release about that, which its outside PR person later walked back, saying in part “That was very probably inappropriate language at this point.”

Full disclaimer from online landing page:

All investments are subject to risk, which must be considered on an individual basis before making any investment decision. World Opportunity Investor is an investment newsletter being advertised herein. This paid advertisement includes a stock profile of Frélii Inc. (OTC: FRLI). This paid advertisement is intended solely for information and educational purposes and is not to be construed under any circumstances as an offer to buy or sell, or as a solicitation to buy or sell, any securities. In an effort to enhance public awareness of FRLI and its securities, TGB MEDIA LIMITED (Payor) provided advertising agencies with a total budget of approximately two million, one hundred eighty-three thousand, six hundred sixteen dollars to date to cover the costs associated with creating, printing and distribution of this advertisement for World Opportunity Investor. FRLI was chosen to be profiled in this advertisement after World Opportunity Investor conducted an investigation of the company. World Opportunity Investor was paid thirty thousand dollars as a research fee. In addition, World Opportunity Investor may receive subscription revenue in the future from new subscribers as a result of this advertisement. The advertising agencies will retain any excess sums after all expenses are paid. As of the date these materials are disseminated, neither the advertising agencies nor World Opportunity Investor nor any of their respective officers, principals or affiliates (as defined in the Securities Act of 1933, as amended, and Rule 501(b) promulgated thereunder) own or beneficially own any securities of FRLI. Neither the advertising agencies nor World Opportunity Investor or any of their respective officers, principals or affiliates will purchase or receive any securities of FRLI for a period of ninety (90) days following the date this advertising campaign is concluded. The Payor has represented in writing to World Opportunity Investor and the advertising agencies that neither the Payor nor any of its officers, directors, principals or affiliates (as defined in the Securities Act of 1933, as amended, and Rule 501(b) promulgated thereunder) owns or beneficially owns any securities of FRLI or will purchase or receive any securities of FRLI for a period of ninety (90) days following the conclusion of this advertising campaign. If successful, this advertisement will increase investor and market awareness, which may result in an increased number of shareholders owning and trading the securities of FRLI, increased trading volume, and possibly an increased share price of FRLI’s securities, which may be temporary. This advertisement, the advertising agencies and World Opportunity Investor do not purport to provide a complete analysis of this company’s financial position. They are not, and do not purport to be, broker-dealers or registered investment advisors. This advertisement is not, and should not be construed to be, personalized investment advice directed to or appropriate for any particular investor. Any investment should be made only after consulting a professional investment advisor and only after reviewing the financial statements and other pertinent publicly-available information about the company and its industry. Further, readers are specifically urged to read and carefully consider the Risk Factors identified and discussed in FRLI’s SEC filings. Investing in micro cap securities such as FRLI is speculative and carries a high degree of risk. Past performance does not guarantee future results. This advertisement 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 advertising agencies and World Opportunity Investor cannot guarantee the accuracy or completeness of the information and are not responsible for any errors or omissions. This advertisement contains forward-looking statements, including statements regarding expected continual growth of FRLI. The advertising agencies and World Opportunity Investor note 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/or services, the company’s ability to fund its capital requirements in the near term and long term, pricing pressures, etc. World Opportunity Investor is the publisher’s trademark. All trademarks used in this advertisement other than World Opportunity Investor are the property of their respective trademark holders and no endorsement by such owners of the contents of this advertisement is made or implied. The advertising agencies and World Opportunity Investor 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 to any rights in any third-party trademarks.

Disclaimer: I am short FRLI and may cover my position 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.