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).