Some belated updates on John Babikian, Awesome Pennystocks, Jay Fung, Eric Van Nguyen, & Anthony Thompson

I haven’t kept up with John Babikian (evidently the man behind Awesomepennystocks.com, perhaps the most successful stock promoter of its time) for the last couple years as not much has happened with him. But I did notice a few things have happened that I had not recorded on this blog, so here they are.

Babikian’s (now ex-) wife dropped her suit against Babikian in LA Superior Court three years ago. I have no clue what happened to the divorce proceedings (those are normally sealed in Quebec).

Request to drop suit (pdf)
Order dropping suit (pdf)

In October 2016 Jean-François Cloutier of Journal de Montreal wrote about Babikian’s former associate Robert Kalfayan and his alleged attempts to remove money from Canada to allegedly escape seizure by the tax authority (article in French). See previous article on Revenue Québec getting a lien on Kalfayan’s home.

Meanwhile, the SEC’s case against Anthony Thompson, Jay Fung, and Eric Van Nguyen (associated with Awesomepennystocks predecessor websites) continues. That case is:

1:14-cv-09126-KBF Securities and Exchange Commission v. Thompson et al
Katherine B. Forrest, presiding
Date filed: 11/17/2014

Currently the case is stayed pending the resolution of the parallel criminal case against Thompson, Fung, and Nguyen and the CEOs of five penny stock companies. If the criminal case (supposed to go to trial on September 27, 2017) does not immediately go to trial the civil case may continue per request of Thompson’s attorneys (docket 70; PDF copy). Below is the judge’s decision (hand-written on the last page of docket 70)

The criminal matter is New York State Court (Manhattan Supreme Court) case 3853/14. See the press release about the original indictment.

Back on May 16th, 2016 the judge ordered a bunch of the charges dropped, including larceny charges, because they were deemed not to fit the crime. The order described in that article can be found on Justia.

I should mention that while the promoters were the ones who became infamous, they were not the alleged mastermind(s). Instead, that was allegedly Kevin Sepe (who was not charged in the case). From the statement of facts in the order I linked above:

STATEMENT OF FACTS

The indictment arises from 9 alleged fraudulent “penny stock” “pump and dump” schemes. A penny stock is one which trades for less than $5 per share, is not listed on the NASDAQ and requires limited disclosure, making investments more risky and volatile. The company shares in this case traded for pennies or fractions of pennies but the conduct here also involved millions of shares. Those companies and their ticker symbols (the symbols which designated the companies on the market) were: Blast Applications (BLAP), Blue Gem Enterprises (BGEM), Recyle Tech (RCYT), Hydrogenetics (HGYN), Xynergy Holdings (XYNH), Mass Hysteria Entertainment Company Inc. (MHYS), Lyric Jeans (LYJN), SunPeaks Ventures (SNPK) and Smart Holdings (SMHS) (hereinafter sometimes referred to as the “subject companies”).

The architect and orchestrator of the scheme was Kevin Sepe. The remaining defendants, as described infra, were either affiliates of Kevin Sepe or stock promoters who worked with him to implement the alleged frauds. The Defendants’ work with the companies followed a similar pattern. A publicly traded “shell” company (a company with no substantial business) would be [*3]identified and Mr. Sepe and his affiliates would then act to merge a private company they controlled into the shell company. This allowed the shares of the new company to be freely traded without a waiting period. Money would be loaned to the company and then the loan would be converted into equity through the receipt of shares of the company stock as a substitute for the repayment of the debt. A stock promotion would then take place. Typically, there would have been very little trading in the company’s stock prior to the promotion. Immediately prior to the beginning of the promotion, however, some shares might be leaked into the market so that regulators would not see that a company went immediately from having no shares traded to a large trading volume.

The shares held by Sepe and his affiliates would rise in value following the promotion. Sepe and his affiliates would sell the shares at huge profits. The promotional campaign would then end. The share price would then rapidly decline. Kevin Sepe and his affiliates knew, in advance, that the stocks would follow this pattern pursuant to the beginning and end of internet marketing campaigns and scheduled and coordinated their stock sales accordingly. In each case, the sales and profits followed the pre-arranged pattern.

A key part of the scheme was to conceal the fact that Kevin Sepe controlled a vast portion of the trading shares. To conceal his ownership, his shares were placed in the names of multiple loyal nominees including Defendants Luz Rodriguez and Joseph Dervali who then sold their shares and split the profits with Kevin Sepe. In addition to concealing his ownership and control, having shares held by these nominees allowed Sepe to evade requirements that persons who held more than 5% of the shares of a company be disclosed.

Kevin Sepe was sued by the SEC back in 2012 for his involvement in the pump and dump of Recycle Tech and HydroGenetic and he settled that case. “Sepe agreed to disgorgement of $1,416,466.16, prejudgment interest of $126,761.86, and penalties of $185,000 as well as a permanent bar from participating in an offer or sale of penny stocks.” As with most SEC settlements, Sepe neither admitted nor denied the allegations in the settlment.

 

Disclaimer. No position in any stocks mentioned and I have no relationship with anyone mentioned in this post. 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.

 

John Babikian update: SEC settles with him, his assets sold off by Revenue Quebec

The SEC settled its lawsuit with John Babikian two weeks ago. This lawsuit, for the promotion and scalping of the stock of America West Resources (defunct now, traded as AWSR then). To the untrained eye, this looks like a tiny slap on the wrist considering all the stock promotions Babikian has run. But the suit against Babikian for AWSR was likely brought in a hurry because of his attempts to liquidate his American assets. As FINRA and the SEC already had investigated AWSR in connection with John Thomas Financial, it was easy to put together a quick lawsuit against Babikian showing that he scalped his promotion. Only the one stock was covered in that SEC lawsuit so the SEC is free to bring more suits against Babikian. Also there is the possibility of criminal charges against Babikian, as pointed out in this Oregon Live article that discusses his investment in an Oregon vineyard:

There remains the possibility the SEC opted to settle to make way for federal prosecutors. If the Department of Justice opts to bring a criminal case against Babikian then Martin’s situation could get more complicated, not less.

Below is from the press release by the SEC:

U.S. SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 23039 / July 8, 2014

Securities and Exchange Commission v. John Babikian, Civil Action No. 14-CV-1740 (S.D.N.Y.)

Court Enters Final Judgment Against Promoter in Settlement of Microcap Stock Scalping Case and Orders $3.73 Million in Sanctions

The Securities and Exchange Commission announced today that the Honorable Paul A. Crotty of the United States District Court for the Southern District of New York entered a final judgment on July 8, 2014, against defendant John Babikian in the Commission action styled, SEC v. John Babikian, Civil Action No. 14-CV-1740 (S.D.N.Y.). The Court entered the final judgment, to which Babikian consented without admitting or denying the allegations in the Commission’s Complaint. The final judgment orders Babikian to pay a total of $3,730,000, comprised of $1,915,670 in disgorgement, together with prejudgment interest in the amount of $128,073, and a civil penalty in the amount of $1,686,257. The final judgment also imposes a bar from participating in any offering of penny stock and enjoins Babikian from recommending, directly or indirectly, the purchase of any U.S. publicly traded or quoted stock without simultaneously disclosing any plans or intentions to sell such stock within 14 days of the recommendation. Finally, the final judgment permanently enjoins Babikian from violating Section 17(a) of the Securities Act of 1933 (15 U.S.C. § 77q(a)), Section 10(b) of the Securities Exchange Act of 1934 (15 U.S.C. § 78j(b)) and Rule 10b-5 promulgated thereunder (17 C.F.R. § 240.10b-5).

The Commission’s complaint, filed on March 13, 2014, alleged that Babikian used AwesomePennyStocks.com and its related site PennyStocksUniverse.com, collectively “APS,” to commit a brand of securities fraud known as “scalping.” The APS websites disseminated e-mails to approximately 700,000 people shortly after 2:30 p.m. Eastern time on the afternoon of Feb. 23, 2012, and recommended the penny stock America West Resources Inc. (AWSRQ). What the e-mails failed to disclose among other things was that Babikian held more than 1.4 million shares of America West stock, which he had already positioned and intended to sell immediately through a Swiss bank. The APS emails immediately triggered massive increases in America West’s share price and trading volume, which Babikian exploited by unloading shares of America West’s stock over the remaining 90 minutes of the trading day for ill-gotten gains of more than $1.9 million.

The Commission wishes to acknowledge the assistance of the Quebec Autorité des Marchés Financiers and the Financial Industry Regulatory Authority.

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

Update on SEC v. Babikian

From May 12th, 2014:

Filed & Entered: 05/12/2014: Memorandum of Law in Opposition to Motion

37-1 (PDF)
37-2 (PDF)
37-3 (PDF)
37-4 (PDF)
37-5 (PDF)
37-6 (PDF)
37-main (PDF)

Many of the exhibits above relate to the troubles Babikian’s shell company Oriwa Villas SA has had selling the 1401 Londonderry property in Los Angeles — the buyer wired money to Oriwa but Oriwa did not record a deed transferring the property to the buyer.

Disclaimer: No position in any stock mentioned above. I have 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.

A Win in court for John Babikian of Awesomepennystocks

John Babikian of Awesomepennystocks.com won a reduction in the size of the asset freeze against him and also had the writs of attachment against his fractional interest in a NetJets plane, two houses in Los Angeles, and his vineyard vacated.

See the document on Scribd:

Case 1:14-cv-01740-PAC Document 36-1 Filed 04/30/14 Page 1 of 3


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

 

Where in the world is John Babikian? Probably in the UAE

It is time for another John Babikian update. And as always we must ask, where in the world is he? Lebanon, UAE, and Russia are all possible. My current bet is the UAE (United Arab Emirates). I will explain why below.


It turns out that Babikian’s Seychelles shell company Middlebay Trade Ltd. had purchased a vineyard in The Dalles, Oregon. See coverage of this in The Oregonian and The Dalles Chronicle. The SEC obtained a writ of attachment for that vineyard and for Babikian’s houses in California so that those properties will not be sold. See the SEC’s complaint (pdf) against Babikian. Here is the SEC press release from March 13th about obtaining an asset freeze against Babikian.

SEC v. Babikian Doc 6 Filed 13 Mar 14 by scion_scion

By the way, follow Scion_scion on Scribd to see updates to the legal case against Babikian.

Today the SEC filed a detailed declaration (PDF) in seeking a temporary restraining order and asset freeze. This document (also shown below through Scribd) gives some details not previously disclosed. It also shows that the SEC has relied a lot on Babikian’s ex-wife’s lawsuits, which goes to show that Hell hath no fury like a woman scorned. Also, this document explicitly links Robert Kalfayan to Babikian — something that has been known by penny stock researchers for years but with the SEC stating it the odds increase that he will be named in a suit soon. It is also quite possible that he or others are cooperating with the SEC. Kalfayan’s company is directly linked to paying for some Awesomepennystocks.com (APS) emails (see page 6 of the declaration).

Other interesting tidbits include the fact that Babikian acquired his ASWR shares directly from the company in a PIPE and deposited them at John Thomas Financial and from there he transferred the shares to an account at Frankfurter Bank (Brown Brothers Harriman was the US custodian of the shares). On the day that AWSR was pumped he sold a number of shares from that account and also transferred some shares to an account held at Apex Clearing and sold some from that account. (On a side note, John Thomas Financial collapsed after being investigated by FINRA and the SEC for its involvement with AWSR.)

Getting back to the question in the title of this blog post, I believe that Babikian is in the UAE because NetJets recently agreed to repurchase the fractional jet ownership interest of Vertical International Relief Fund (Babikian’s front charity – see info PDF) for substantially below market cost. And:

Babikian has requested that NetJets wire the proceeds to an account in the name of “Elementos Ltd.” at a financial institution in the United Arab Emirates named Emirates NBD [page 17 of document below]

SEC v. Babikian Doc 15 Filed 21 Mar 14 by scion_scion

Disclaimer: No position in any stock mentioned above. I have no relationship with any parties mentioned above except that I am a paying subscriber of PromotionStockSecrets. 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.

The End of Awesomepennystocks.com: Eric Van Nguyen says he was betrayed by John Babikian

I apologize for the slowness of this post. Life (and trading) have been quite busy this month. Jean-Francois Cloutier posted a new article about Awesomepennystocks.com / John Babikian on January 7th. Read the article (in French) in the Journal de Montreal. Below is a translation for those who don’t read French. See my prior post about Babikian. I think it is quite clear that Eric Van Nguyen’s portrayal of his involvement is self-serving — he is far from innocent.

 

A former close associate of John Babikian, the mysterious 26 year old Montreal resident who is being targeted by the AMF [Quebec securities commission] and Revenue Quebec (Quebec tax authority), says that he was betrayed by Babikian in the promotion of penny stocks.

Eric Van Nguyen defends himself by saying that he was naive in “lending” his account and name for some tens of thousands of dollars to Babikian so that Babikian coule promote penny stocks.

“At that time, I had no idea that this would become this big — you mustn’t doubt.”

Our investigative bureau succeeded in finding this young Quebec man  who had been accused in 2009 along with Babikian of stealing a list of email addresses.

Van Nguyen says that he sold all his penny stock promotion websites in 2012. He did not want to reveal anything about the buyer of the websites other than that the buyer was outside of North America.

This man, who says that he initiated Babikian into the world of penny stocks, is extremely secretive and he has been invisible on the internet for several years. He has no Facebook account. Numerous acquantinces that he knew from his studies at Concordia University have no news of him. Rumors on the internet suggest that he is even in Singapore.

The luxurious mansion that he lives in in West Island is not in his name.

If he is still in Quebec despite the troubles of his old associate, it is because he was worried about his parents, he said.

“I could travel, sure, but I don’t want to leave my parents to deal with my problems. There are a lot of people who come to their door” since the publication of articles on John Babikian. [One of the addresses used for Golden Dragon Media appears to belong to his parents — that is easy information to find.]

Babikian wanted to hide himself

Eric Van Nguyen says that he met Babikian in 2009. At that time, he was himself already involved in the business of promoting penny stocks. His company, Golden Dragon Media, registered in Quebec, is behind a network of stock promotion websites. These sites send newsletters promoting speculative stocks that cost pennies.

“He wanted to know my techniques,” said Van Nguyen.

According to Van Nguyen, John Babikian paid him to use an account at PR Newswire. He was also able to manage websites affiliated with Golden Dragon Media (including Pennystockslove.com, Loveforstocks.com and Unrealstocks.com).

“Today, because of that, my name is in the garbage. He betrayed me — he ruined my name,” said Van Nguyen.

Why would John Babikian have wanted to use Van Nguyen’s name rather than his own, we asked him.

“He never wanted his own name to appear. The SEC had begun to scrutinize the stock promotion business.”

We were not able to reach John Babikian.

Revenue Quebec and the AMF want to meet him again

According to Van Nguyen, the world of pennystocks is just like a lottery.

“One can easily lose everything if you invest in them. To be frank, this is not an extremely white business. It is not black either but certainly grey,” he says. When promotion involves the use of spam emails “it becomes black” according to him.

Van Nguyen even mentions  the presence of a member of the Montreal Mafia in the world of penny stocks.

Van Nguyen saws that agents from Revenue Quebec met him recently to understand how he became rich. The AMF (securities regulator) also asked him questions, but he refused to respond. Too risky, according to him.

“There is talk of an FBI investigation in the USA. One would also think that the RCMP [Royal Canadian Mounted Police] is also investigating,” he said.

More liens by Revenue Quebec

Revenue Quebec has been granted new liens on $6.6 million worth of John Babikian’s assets. Oddly, none of the properties are in his name. At least one director of a numbered company linked to Babikian, Rawad Adra, appears to be completely fictitious

Three properties adjacent to Babikian’s luxurious mansion on Rue des Anemones (Street of the Anemones) in Laval. 

Value: $2.1 million
Area: 5665 square meters
Official owner: 9264-5076 Quebec Inc
Administrator: Rawad Adra
Shareholder: Tidal East Global
Relief: Robert Kalfayan, Gerard Babikian, Leonnel Iruke [I am unclear what this means in this context]

Sixteen properties in Nominingue, in the Laurentians, around Lake Lafleche

Value: $4.5 million
Total area: 360,478 square meters
Official owner: 9292-2095 Québec inc.
Administrators: Alima Beg, Ehsan Haque
Shareholders: None

 

Disclaimer: I am currently short USTU which is currently being promoted by Pennystocks.com, which up until at least the last stock promotion was run by the same people running Awesomepennystocks.com (presumably John Babikian). I have 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.

More on John Babikian: Synopses of three new articles in Journal de Montreal

I will update this post as I complete translations or synopses of the articles. The original articles are in French.

29 November: Une mère monoparentale se souviendra longtemps de Babikian (A single mother will remember Babikian for a long time)

29 November: Une fraude, selon un expert (A fraud, according to an expert)

27 November: Le mystérieux multimillionnaire Babikian dans la mire de l’AMF (The mysterious multimillionaire Babikian in the sights of the Quebec tax authorities)

For my own part, I can state that the AMF (Quebec tax authority) is very aggressively pursuing leads on the whereabouts and assets of John Babikian. They are putting a lot of time and manpower into this.

Highlights of the oldest article:

Jose Lorrea, the current owner of a condo formerly belonging to John Babikian, was interviewed by Xavier Saint-Pierre and David Gallant for a half hour.

“They wanted to know what I knew about the sale of the condo,” he said. He bought the condo on April 4th, 2013 for C$447,000. John Babikian was never present for the sale of the condo and was represented by his parents, Gérard Babikian and Laudy Khairallah.

Babikian acquired the condo in 2009 in the name of a numbered company for the price of C$348,881. During the sale, Babikian declared that he had never been married or in a civil union. However, this is contradicted by a marriage filing with the Montreal court on July 31, 2010.

The Quebec tax authority recently obtained a judgement against John Babikian for C$1.78 million for taxes owed in 2011. According to the judgement on November 21, Babikian must pay C$1,782,518.55 and daily interest from November 22nd. This is in addition to prior judgments against Babikian for taxes owed for the years 2008 to 2010.

Highlights of the second article:

 The case of Sunpeaks Ventures (SNPK), promoted by websites linked to John Babikian, is clearly a stock fraud, according to a former SEC lawyer, Gary Aguirre.

[The article describes how pump and dumps work — which is unnecessary for my readers]

Mr. Aguirre envisaged that there would be a year to file a class action against Sunpeaks Ventures and Awesomepennystocks, after having received many calls from investors who had been fleeced in the pump and dump. However, he was not able to find the person or persons who ran the scheme.

“These are moving targets — they hide themselves behind offshore entities. It is extremely troubling that neither the SEC nor the FBI have yet acted in this case, because only they can unmask the masterminds of this scheme.”

Highlights of the most recent article:

 The sad history of a single mother from the Chicago area who lost money in an Awesomepennystocks pump and dump can in part explain how John Babikian acquired a huge fortune.

Amy, a 57 year old American, contacted us soon after our first article about John Babikian.

“I don’t know who gave them my address, but I regularly received promotional announcements about certain companies,” she said. In March 2012, she received emails about a company in the business of distributing specialized medicines. The company, Sunpeaks Ventures, was said to be at the point of commercializing their multivitamin product designed for people taking anti-coagulant drugs.

Amy confessed that she had wanted to buy about $35,00 worth of Sunpeaks stock because of her enthousiasm for the product Clotamin. “They said that they were at the point of signing an agreement with Walgreens,” she said.

She ended up investing more and eventually losing over $100,000 on Sunpeaks stock. “I live day to day — $100,000 — that was all my retirement savings. I don’t know how I will get out of this,” she said.

Disclaimer: I have no position in any stocks mentioned 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.

The End of Awesomepennystocks.com: John Babikian flees Canada

A year ago, when Infitialis wrote an article on PRTN on SeekingAlpha, they listed five people as being likely to be behind Awesomepennystocks.com (APS) and its related stock promotion websites. SeekingAlpha was threatened with a libel lawsuit (pdf) so that article was revised and the names were removed. I found a copy of the earlier version of that article still online here. One of the people mentioned as likely to be behind APS was John Babikian.

Babikian was just featured in two articles in the Journal de Montreal (in French):
Les Américains s’intéressent aussi au mystérieux millionnaire – 2013-10-22 (free version)
Le fisc veut sa Bugatti Veyron – 2013-10-20 (English version at the Toronto Sun)

These articles discuss his enormous wealth and the taxes he has not paid. A source told me that there will be more articles to follow and that they will link Babikian to Awesomepennystocks and detail where exactly his money came from.

See my article from yesterday on Awesomepennystocks.com retiring.

Here is an excerpt from the English version of the first article:

MONTREAL – Financial authorities in Canada and the U.S. are searching for John Babikian, a mysterious Montreal playboy who amassed a $100-million fortune in a few short years before moving to Monaco.

The 26-year-old entrepreneur left behind luxury items including a $2-million mansion north of Montreal, a 2008 Bugatti Veyron and 2010 Bentley Continental, QMI Agency has learned.

Revenue Quebec is now chasing the millionaire for back taxes.

Tax authorities allege $11.5 million in income was hidden from the government between 2008 and 2010. Babikian reported $47,677 in income in 2008, documents say.

Quebec’s AMF financial watchdog and its American counterpart, the Securities and Exchange Commission (SEC ), also want to know how Babikian earned his keep.

Here is a full translation (by me) of the second article:

The origin of the mysterious fortune of Montreal resident John Babikian, estimated at C$100 million, attracted not only the attention of the Quebec tax authorities but also of the American authorities.

The spokesperson for the AMF (l’Autorité des marchés financiers), Sylvain Theberge, indicated to our research bureau that his American counterpart, the SEC, had contacted the AMF about Babikian in 2011.

“The SEC was investigating this gentleman  and they asked us to help them identify him,” he said.

For its part, the SEC refused to confirm the existence of an investigation. “When we take action against someone it becomes public then,” said a spokesperson for the the SEC in New York.

Acorrding to documents prepared by a lawyer of the Bank of Montreal, John Babikian launched his business at the age of 19. He created a company specializing in internet marketing, J.B. Marketing.

Babikian became a specialist in spam. At the time the he opened a business account at the Bank of Montreal in 2006 he disclosed that he earned $24,000 per year, according to documents.

However, his company J.B. Marketing rapidly sent hundreds of thousands of dollars into his bank account. These sums came from nebulous and hard to trace sources.

In March 2010 the Bank of Montreal closed his bank accounts because Babikian, according to the bank, did not furnish satisfactory explanations of where the money was coming from.

[Edit 2013-10-30]: The wife of John Babikian (who just last month filed for divorce in Quebec), sued him in California for fraud for his actions to sell their properties in California while depriving her of her rightful share of the proceeds. See her legal complaint. Credit for finding that lawsuit goes to Infitialis.

The two properties that are discussed in that lawsuit are 1401 Londonderry Place, Los Angeles, CA and 642 North Laurel Avenue Los Angeles, CA (links are to Zillow). The Londonderry house was purchased in March 2012 for $6 million and is currently estimated to be worth $10.5 million by Zillow. The Laurel Avenue house was purchased in December 2010 for $2.2 million and is now estimated by Zillow to be worth $2.7 million. Babikian’s wife alleges that he fraudulently transferred the title of the Laurel Avenue house to Middlebay Trade Ltd., a Republic of Seychelles entity that he secretly controls. The transfer to Middlebay Trade Ltd. is shown by property records.

I also credit Infitialis with finding Babikian’s wife’s divorce suit in Quebec, even though the complaint has been sealed. After posting the lawsuit here I received a request from the lawyer representing Babikian’s wife requesting that I redact her client’s name. Because she asked nicely and admitted that the I was not prohibited by the law from disseminating the lawsuit (because US privacy laws are much looser than Canadian ones), and because her client’s divorce suit will likely help to send Babikian and his colleagues to prison, I have complied with her request and thus have the redacted copy of the lawsuit here (pdf). That redacted copy of the suit is at Promotion Stock Secrets’ website (see their excellent post on Babikian and Awesomepennystocks.com).

[Edit 2013-10-25] A third article has been posted on the Journal de Montreal: Une Fortune Cachee dans les Paradis Fiscaux. Below is my translation:

Passports from four countries, bank accounts in ten tax havens and an encrypted Blackberry destroyed each week, John Babikian, the mysterious 26 year old Montreal multimillionaire , took extreme measures to protect his money.

New information obtained by our research bureau shows that the the multitalented former student of La Dauversiere in the north of Montreal has built a veritable offshore empire. This portfolio has had repercussions in the United States with an investigation by the SEC.

The famous Bugatti Veyron worth $1.5m appeared in the Grand Prix of Montreal in June and is only the tip of the iceberg of an immense fortune for this businessman, according to the allegations in court documents that we consulted.

A wine collection worth $1m and two sculptures by New York sculptor Arturo di Modica worth $600,000 are among the belongings that Babikian has removed from Quebec over the last few months.

Babikian also owns nine condos win the Bahamas of which seven are owned in the name of a shell company according to our sources. He also bought a Pagani Huara in Italy, a luxury car that costs $1.1m.

No less than twenty bussinesses and so-called charities, most of which are completely empty shells in tax havens, help to hide other riches according to the documents we have consulted.

John Babikian has taken extreme measures to evade the watchful eyes of investigators.

“He runs his affairs solely with specially encrypted Blackberrys that he uses for a few days or weeks before he destroys and replaces them,” court documents allege.

After destroying each smartphone and breaking it into multiple pieces that he tosses into different garbage cans “so that it is absolutely impossible … to access the information that they hold”, according to those court documents.

John Babikian also has a special portable device from HSBC Bank in Hong Kong that lets him make international wire transfers from anywhere in the world.

From the infographic at the top of the article detailing some of Babikians holdings:

John Babikian travels in a private Gulfstream jet owned by NetJets. His account with NetJets is in the name of the shell charity “Vertical International Relief Fund”

Hong Kong – Babikian has bank accounts

Seychelles – Multiple shell companies (Middlebay Trade Ltd., Liner Investments Ltd., Intelligent Alliance Corp., Auorora Intour Ltd., Monolith Ventures)

Lebanon – Babikian is a citizen

Malta – Babikian has bank accounts

Monaco – Babikian has two bank acocunts

St. Kitts and Nevis – Babikian is a citizen, has shell companies, and owns real estate

Panama – Shell companies (Montblue Commerce, Nothingham Group, Normandia Capital)

British Virgin Islands – Shell companies (Arrow Import & Export Corporation, Antica Ventures)

Bahamas – Nine condos (seven of which are in the name of a shell company, John Jack Ventures), bank account, company (Kenora Overseas)

Quebec – Numbered companies (9264-5076 Quebec Inc, Bargainoo Est), charity (Tidal East Global Relief)

United States – Two houses in California worth $8.2m, a shell company (Oriwa Villas Ltd), shares of companies, charity organization

Belize – Bank accounts, companies (Antica Ventures Ltd., Mediasky Holdings Ltd., Beddington Marketing)

Guatemala – Diplomatic passport, had taken steps to start a private bank, shell company (One Berger Circle)

 

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

Broker and OTC market maker Wilson-Davis Co. fined by SEC for Reg SHO violations

In an administrative proceeding released on April 26, 2017, the SEC issued a cease and desist order (PDF) to brokerage and OTC market maker Wilson Davis (Market maker ID: WDCO) for violations of Regulation SHO and ordered the company to pay $235,714.50 in disgorgement of profits and interest thereon and a $75,000 civil penalty. But the headline of a violation of short selling regulations obscures the fact that the trading in question was related to some of the biggest pump and dumps ever perpetrated, all promoted by AwesomePennyStocks.com or related websites.

There are a few details in the order that are key. First, Wilson-Davis had two separate trading groups. From the SEC’s order linked above:

WDCO was comprised of two trading groups: a retail trading group and a proprietary trading group. The activity that is the subject of this Order pertains to WDCO’s proprietary trading group. Traders in the proprietary trading group had agreements with WDCO under which the traders were allowed to use WDCO funds for proprietary trades of securities and would split their profits with WDCO in accordance with their agreements.

Not mentioned in the order is that one of the traders was Anthony Kerrigone, who has already been sanctioned by the SEC in December 2016 (PDF). From that administrative order:

Kerrigone, a proprietary trader at WDCO, is a WDCO representative who caused WDCO’s Regulation SHO violations by executing certain short sales of securities on behalf of WDCO without WDCO being engaged in bona-fide market making activity and without WDCO obtaining a locate prior to effecting the short sales. Kerrigone improperly relied on the bona-fide market making exception for certain short sale trades without having a reasonably sufficient understanding of the rule, without sufficiently discussing with anyone at WDCO whether such trading qualified WDCO for the bona-fide market making exception, and by conducting such trading in a manner that closely resembled examples explicitly identified by the Commission— years before the conduct at issue—as activity that generally is not bona-fide market making.

Anthony Kerrigone was ordered to pay disgorgement of profits (and interest thereon) of $550,000.50 and a civil penalty of $50,000. Prior to the SEC order, Kerrigone (CRD#: 2612581) was also cited by FINRA back in November 2015. From FINRA BrokerCheck (FINRA does not allow direct linking so you have to search for Kerrigone by his name):

Initiated By FINRA
Allegations
Without admitting or denying the findings, Kerrigone consented to the sanctions and to the entry of findings that he caused his member firm to violate Rule 203(b)(1) of SEC Regulation SHO when on occasions, Kerrigone placed orders to sell short low-priced stocks through the firm’s proprietary trading account and failed to locate the securities, claiming the market marker exemption to the locate requirements. The findings stated that the market maker exemption was not available to the firm because Kerrigone was not engaging in bona-fide market marking activities in these securities. The firm generated over $158,239 in profits from these short transactions.
Resolution
Acceptance, Waiver & Consent(AWC)
Sanctions
Civil and Administrative Penalty(ies)/Fine(s)
Amount: $10,000.00
Sanctions
Suspension
Duration: six months
Start Date: 12/7/2015
End Date: 6/6/2016

Surprisingly, Kerrigone was able to get another job in the industry after that suspension and according to BrokerCheck he still holds it, working for BMA Securities, another OTC market maker (Market maker ID: BMAS).

The Pumps & Dumps

Listed in the SEC order are five examples of stocks where a trader or traders at Wilson Davis improperly sold short stocks using the market maker exemption while not acting as a bona fide market maker: Amwest Imaging (AMWI), North Springs Resources Corp (NSRS), Sunpeaks Ventures (SNPK), Great Wall Builders (GWBU), and Pristine Solutions (PRTN). AMWI was promoted in December 2011 by Crazypennystocks.com and related websites (a predecessor promoter to Awesomepennystocks). NSRS was promoted in January and February of 2012 by Crazypennystocks.com. See synopses of these and other big promotions of 2011/2012. SNPK was promoted in April 2012 by Awesomepennystocks-related websites. GWBU was promoted by Awesomepennystocks in June 2012. See also this article on GWBU manipulation. PRTN was promoted by Awesomepennystocks in September/October 2012. Infitialis wrote an excellent article on SeekingAlpha at the time alleging manipulation of PRTN.

That Infitialis article in particular does a great job of explaining some of how a trader at WDCO allegedly traded Awesomempennystocks pumps while at Wilson-Davis. From that article:

We also know that one specific broker dealer Wilson Davis & Company is continually engaged in showing abnormally large bid sizes on every single APS scam since 2010.

The most obvious question to ask is why? Why would WDCO go out of its way to display such larger orders if their true intention was to buy the shares. The obvious answer is that WDCO is not trying to buy shares they are trying to manipulate the stock while other market makers such as ATDF liquidate shares. These transactions occur simultaneously often serendipitously:

  1. APS Stock begins to decline
  2. WDCO shows up with an abnormally sized bid, stock stabilizes
  3. ATDF shows up on the offer and sells into the buying generated by WDCO.

This behavior is described in the SEC order as WDCO updating its bids for stocks but having a very high offer and then short-selling through other market makers (“While posting an offer quotation that was not at or near the best offer, WDCO executed short sales at prices that were substantially away from its posted quotation.”). Of course, that SEC order makes no mention of big bids, yet that is something that has been documented many times (most traders who traded Awesomepennystocks pumps will recall this and this is documented on numerous blogs and tweets). For example, here is a post about manipulation on GWBU that shows multiple screenshots of Wilson-Davis (WDCO) displaying huge bids. Here are screenshots of big bids by WDCO on NSRS. I have copied just two of those screenshots below in case the original website is taken down.

Note: None of this is to suggest that the firm approved of or ordered any trader to act in an unethical or illegal manner — all I know is that I have seen someone at WDCO posting large bids on many of these stocks.

Just for fun, here is WDCO showing absurdly large offers on a non-Awesomepennystocks pump (I make no commentary during the video so just mute it if you do not want to hear the music I was listening to at the time):

 

Disclaimer. No position in any stocks mentioned and I have no relationship with anyone mentioned in this post. I traded (both long and short) most if not all of the stocks mentioned in this post at the time they were promoted. 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.

And then there were none: SEC suspends trading in second consecutive Finest Penny Stock pump

Today marks the death of big paid stock promotions run by opt-in email stock promoters. The number and effectiveness of the big promoters had been declining for years, with numerous SEC trading suspensions, lawsuits against promoters, lawsuits against gatekeepers (brokers and lawyers), and criminal prosecutions. First went BestDamnPennystocks, then Awesomepennystocks, then StockTips. The number of lawsuits against lesser stock promoters over the last few years is too high to count.

Today’s suspension of trading in the FinestPennyStocks pump Midwest Oil and Gas (MWOG) after their previous pump BRKO had also been suspended should end the effectiveness of this stock promoter and leave the US markets with no truly effective stock promoters. Perhaps the most interesting thing is that FinestPennystocks has connections to AwesomePennystocks and Eric Van Nguyen — so it is not surprising that they were targeted by the SEC but only surprising that they were targeted so slowly.

MWOG will resume trading on the grey market on May 23rd. The reason for the trading suspension was “recent, unusual and unexplained market activity in the company’s stock taking place during a suspicious promotional campaign.”

SEC Trading Suspension (PDF)
SEC Trading Suspension Order (PDF)

mwog

Big budget snail mailer stock promotions have almost completely ceased over the last few years; from scores per year in 2013 to only one effective big budget mailer last year (Nugene International, NUGN, endorsed by Kathy Ireland). This all started back in 2013 with the SEC suspension mid-pump of Biozoom (BIZM) and the creation of the SEC’s microcap task force.

For the record, here are all the websites of which I am aware that are affiliated in some way with FinestPennystocks (whether by having promoted the same stocks or having the same IP address as websites that have promoted these stocks):

 

FinestPennyStocks Pennystocks.de
FinestPennyStocks pennystocksborse.de
FinestPennyStocks AmazingPennyStockPick.com
FinestPennyStocks AmazingPennyStockPicks.com
FinestPennyStocks StocksThatSoar.com
FinestPennyStocks PoisedtoSoar.com
FinestPennyStocks Stockstrategysecrets.com
FinestPennyStocks Wallstmagazine.com
FinestPennyStocks FinestPennyStocks.com
FinestPennyStocks SmartStockChoices.com
FinestPennyStocks Thebestofthemarket.com
FinestPennyStocks smartstockwinners.com
FinestPennyStocks bestamericanstocks.com
FinestPennyStocks stocktipmagazine.com
FinestPennyStocks PennyStockRepublic.com
FinestPennyStocks Pennypros.net
FinestPennyStocks PennyStocksWinner.com
FinestPennyStocks PennyStocksforMe.com
FinestPennyStocks pennystocksborse.de
FinestPennyStocks BestRisingStocks.com
FinestPennyStocks BestProfitableStocks.com
FinestPennyStocks BestProfitableStocks.com
FinestPennyStocks TopRisingPennystock.com
ElitePennyStock ElitePennyStock.com
ElitePennyStock Pennystocksthatrise.com
ElitePennyStock ElitesPennyStock.com
ElitePennyStock Qualitypennystocks.com
ElitePennyStock mysoaringpennystocks.com
ElitePennyStock TopGainPennyStock.com
ElitePennyStock EquitiesThatSoar.com

There were a number of stock promotions that both the FinestPennystocks and ElitePennystock websites promoted and a number that only one or the other group promoted.

 

Disclaimer No position in any stock stock mentioned above. I have 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.