SEC takes stand against wash trading

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 and looking to bring the hammer down on those traders as well.

Litigation release
SEC complaint

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.

Disclaimer: I have no position in any stock mentioned above and 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.


2 thoughts on “SEC takes stand against wash trading”

  1. Another recent wash trading case:

    CALGARY — A Calgary rig worker who used his off weeks to become a day trader and convinced a Vancouver gold mining company to hire him as a promoter has been found to have illegally attempted to manipulate the market.

    An Alberta Securities Commission panel has ruled that David De Gouveia violated securities laws by engaging in a pattern of trading including upticks (trading at a higher price than the immediately preceding trade); high closes (closing trades on an uptick); wash trades (acting as both seller and purchaser in the same transaction); and uneconomic trades (selling and then immediately buying shares at a higher price.)

    Read more:

    ASCC order: (PDF)

  2. Went by the handle “Coffintrader” at Stockhouse, the largest Canadian investment forum.

    Guess he’ll be finding out the penalty imposed pretty soon.

    Hear he is still active on Stockhouse, surprised he hasn’t been booted off that forum.

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