The type of microcap manipulation / fraud I most commonly blog about is the stock promotion, where someone is paid by insiders to promote an essentially worthless stock to naive investors. This is the most obvious kind of scam and perhaps the most prevalent but it is far from the only scam being run on OTC stock investors and traders. There is of course the debt-dilution scam, where insiders in the company conspire with death-spiral financiers that get the stock at a discount and then sell, driving the price inevitably downward. A recent SeekingAlpha article highlighted ten companies with linked insiders and lenders allegedly running this kind of scam. Of course, even if the insiders aren’t conspiring with death spiral lenders, such financing always drives the stock downward. A few months ago Zeke Faux of Bloomberg had a good article on Josh Saison, a major death spiral financier.
A much less common OTC scam is the fake dividend scam, where a penny stock company without significant assets or with assets of questionable value announces a large cash dividend. Normally, the dividend is just a way to pump the stock up so insiders can dump shares. But it appears that Calissio Resources (CRGP) has improved on that scam by finding away to pay itself real money by manipulating the dividend clearing/payment system, or at least that is what is alleged by COR clearing in a lawsuit against the company. Omaha.com has a good synopsis of the lawsuit and what has happened. FINRA ended up halting trading in CRGP on August 27th (without every explaining why) and the stock only just resumed trading today (on the grey market), down 86%.
One well-respected microcap fraud researcher noticed many similarities among CRGP and past dividend scams SRGE and SAEI and he speculated on who was ultimately behind them. The only thing that is completely certain about CRGP is that anyone who bought the stock because of the dividend news lost a lot of money if they didn’t sell prior to the halt. That is the usual outcome in penny stocks. For an in-depth look at the CRGP dividend, see Brenda Hamilton’s blog.