A week ago the SEC issued a litigation release stating that it had sued Robert C. Crane for market manipulation and had already obtained a settlement. What is unusual is that while Crane engaged in wash sale trading in an apparent attempt to “create the false appearance of an active and liquid market for two securities,” his attempts were unsuccessful and he did not profit from the scheme. The SEC obtained a penny stock bar against Crane but did not seek a financial penalty.
Some have said that this is a waste of the SEC’s time when they could be acting against people who actually profit from their malfeasance. I agree with the SEC’s actions in this case because it sends a clear message that manipulative trading is illegal and will be investigated. You don’t have to do it well and make lots of money for the SEC to come after you. I can only hope that the SEC is investigating wash trading in large pump and dumps (like those of Awesomepennystocks.com) and looking to bring the hammer down on those traders as well.
From the complaint:
17. In June 2010, Crane executed wash sales in Argentex and ERHE stock.
18. In each of the wash sale transactions, Crane bought and sold shares of stock from one
ofhis accounts into another one of his accounts with no change ofbeneficial ownership over
those securities. He paid a commission on both sides ofthe transaction. The scheme was
designed to create the appearance ofan active and liquid market for those securities.
19. By engaging in these wash sales, Crane compromised the integrity ofthe market by
creating the appearance of genuine trading activity for the securities in which he transacted. In
fact, Crane’s trades frequently inflated the volume, and, on one occasion, the price ofthe
securities he manipulated.