Nathan M. Michaud, a prominent penny stock trader, has settled with the Securities and Exchange Commission regarding a civil suit filed by the SEC in May 2009 regarding a pump & dump that occurred in the stock of Asia Global from August 2006 until February 2007. Michaud is known online as “Investorslive”, has 9,000 Twitter followers, and runs the website Investorslive.com and since 2009 he has run the trading chatroom InvestorsUnderground.com. The settlement proposal, under which Michaud has agreed to pay $93,914.19 to the SEC, was filed on December 21st, 2011 with the U.S. District Court of Delaware.
The original SEC complaint in the case was filed May 20, 2009 and can be found online at the SEC’s website (direct link to pdf). A summary of the complaint can also be found on the the SEC’s website (link). The misdeeds alleged by the SEC in this case were fairly complicated and involved eight different people (since amended to include four others) and in the pump and dumps of four different stocks. A parallel criminal case filed by the US Attorney for the District of Delaware charged six of the eight sued by the SEC (Michaud and Adam S. Rosengard were the only two charged civilly and not criminally). Named in the SEC civil case and also in the criminal case were Pawel P. Dynkowski, Matthew W. Brown (founder of InvestorsHub), Jacob Canceli, Gerard J. D’Amaro, Joseph Mangiapane Jr., and Marc J. Riviello. I will not further discuss the criminal case in this post– much has been written about that already.
Following are excerpts from the original SEC complaint that highlight the allegations against Michaud. (Also see the 2nd amended complaint that I downloaded from the Delaware District Court, from December 22, 2011, which includes four additional defendants.)
4. Brown planned the Asia Global pump-and-dump scheme with Defendants Joseph Mangiapane and Marc Riviello, who were both registered representatives at a small broker-dealer in California. Dynkowski and Defendant Nathan Michaud, who met through InvestorsHub.com, pumped the price of the stock using wash sales, matched orders, and other manipulative trading, coordinated with false, misleading, and touting press releases by the company. The scheme occurred in three cycles: August-September 2006, November-December 2006, and January-February 2007. After manipulating the price of the stock, Dynkowski, Brown, Mangiapane, and Riviello dumped more than 54 million shares that had been improperly registered on SEC Form S-8 and held in nominee accounts. The illicit proceeds from this scheme totaled at least $4,050,529.
46. Defendant Nathan Michaud, a trader whom Dynkowski had previously met through InvestorsHub.com, also participated in this scheme. In August and September 2006, Dynkowski and Michaud, as well as others, engaged in wash sales, matched orders, and other manipulative trading to generate phony volume and artificially inflate Asia Global’s stock price. When the scheme began, Asia Global traded for approximately 11 cents per share. Starting on August 9,2006, Dynkowski and Michaud began to pump the stock using wash sales, matched orders, and other manipulative trading. Dynkowski and Michaud continued their manipulative trading through the end of September 2006.
47. This manipulative trading artificially inflated Asia Global’s stock price. In the space of thirteen trading days, the price ofAsia Global’s stock rose from 11.5-cents per share at the close of the market on August 9, 2006, to an intraday high of 41 cents per share on August 25,2006. As i a Global’s daily volume likewise jumped by millions of shares per day during this period.
When asked for comment via email, Nathan Michaud emphasized that he “had nothing to do with the dumping” of improperly registered stock. From the SEC complaint: “Dynkowski, Brown, Mangiapane, and Riviello dumped more than 54 million shares that had been improperly registered on SEC Form S-8 and held in nominee accounts.“.
The SEC asked the court to punish Michaud with the following actions:
c) permanently enjoin Defendant Michaud from engaging in future conduct in violation ofExchange Act Section 10(b) [15 U.S.C. § 78j(b)], Rule lOb-5 thereunder [17 C.F.R. § 240.10b-5], and Securities Act Section 17(a) [15 U.S.C. § 77q(a)];
f) order Defendant Michaud to pay civil penalties under Exchange Act Section 21 (d)(3) [15 U.S.C. § 78u(d)(3)];
h) order Defendants Dynkowski, Brown, Canceli, D’Amaro, Mangiapane, Michaud, Riviello, and Rosengard to disgorge, with prejudgment interest, any ill-gotten gains and provide an accounting of monies they received;
The settlement proposal was filed by the SEC with the Delaware District Court on December 21, 2011, as was Michaud’s consent to the settlement. As is usual with SEC settlements, by consenting to the settlement, Michaud neither confirmed nor denied wrongdoing and agreed not to break securities laws in the future. He was also ordered to pay $40,600 of disgorgement of profits, $3,314.19 in interest, and a civil penalty of $50,000 (totaling $93,914.19).
From the settlement proposal:
IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that Defendant is liable for disgorgement of $40,600, representing profits gained as a result of the conduct alleged in the Complaint, together with prejudgment interest thereon in the amount of $3314.19, and a civil penalty in the amount of $50,000 pursuant to Exchange Act Section 21(d)(3) [15 U.S.C. § 78u(d)(3)].
Previously, Timothy Sykes wrote about the allegations against Michaud back in August 2010.
What is my take on this? I have interacted with Nate Michaud online since April 2008 and I was in his chat room for all of 2009 and 2010. In none of my interactions with him has he come across as anything less than honest and I have not later found anything of substance he has said to be untruthful. He continues to trade pump and dumps (both long and short). I do believe that he is guilty of impropriety in the case he settled with the SEC, but I have not seen anything to indicate that he has acted improperly since I have known him. Please see my disclosures below on my relationship with Nate Michaud.
Update 1/25/2012: The judge has signed off on the settlement (PDF), making it official. One interesting thing to note is that Michaud signed the settlement in November 2010 — it took over a year for it to get filed with the court and approved by the judge (due to the related criminal case against other people).
13 thoughts on “Penny stock trader Nate Michaud settles with SEC in pump & dump case”
Hope you had a Merry X-Mas Michael, and a Happy New Year.
Does the new blog and direction indicate a possible pay site and alerts in the future. I’m surely going to miss the old blog, lots of good memories there over the last couple of years. The beginning of that blog was the same time I started moving to Houston.
Preston — that is highly likely. All my old blog posts will remain up and freely available even if I do a pay site, and I will post more free posts in the future.
All is mostly well with me and I hope you had a good Christmas as well and that the new year finds you and your family in good health.
That’s great, I’ll definately sign up.
I hope the “mostly” part is not illness or health problems, for you or loved ones.
I can log into Tim’s chat but it keeps kicking me so I just gave up. I’ll make sure to start reading the blog more often for future updates.
Preston — yeah we’re in fine health. Contact Mike at Profit.ly and give him as many details as possible on your getting kicked out of chat so he can fix the problem. http://profit.ly/contact
why do you believe he was guilty Michael?
Because he settled and he associated himself with Dynkowski and the others.
Millionaire challenge student here (assume you can see my email address on your side of post). Found this entry after looking at speaker schedule for conference tomorrow oddly enough. Coming from nearly 15 yrs practicing law, and sprlecifically as a litigator, I can tell you ppl don’t settle just because they did something wrong. Litigation is gut-wrenching, especially when it’s against u personally. No comment on life choices to associate with people also accused, but the guilty because settled comment is offbase.
Amanda — I have to strongly disagree, at least for SEC cases that do not involve insider trading and specifically for microcap fraud cases involving scalping, pump and dumps, and manipulative trading. I have almost never seen details of a settled case that left doubt in my mind about the guilt of the accused. I have closely followed all microcap fraud cases brought and settled by the SEC in the last couple years and have read over 100 complaints. There have been just a few cases where the evidence was not overwhelming. This is one of those cases, though.
I am in Tim’s chat room like you. I have bought Nate’s first DVD. I stumbled upon this article by chance. I am a little confused now. Do you still think Nate once was a pumper? He seemed like such an honorable guy at PSC7? Thanks.
My thoughts on what he did have not changed. But I have not seen him engage in anything similar to what he was sued for by the SEC or anything else that is shady. Plus, he mostly trades liquid Nasdaq stocks now so I don’t think it a big issue.
Thank you Michael. Loved your “Twitter influence” presentation btw. All the best. Majestic12.
fool’s wrath presently known; prudent covereth shame. i learned this the hard way.