Category: SEC actions

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.

With more and more mailer pumps getting suspended by the SEC and with AwesomePennyStocks’ mastermind John Babikian on the run, there are fewer big pump and dumps for me to blog about. The most effective remaining stock promoter is one that I have not yet blogged about: StickTips.com. Their last two pumps, AMMG and PGLO, both lasted for weeks and saw lots of volume and price increases upwards of 100% from when the pumps began. But the problem now is that being the best promoter is like painting a bullseye on your chest: that means the SEC Microcap Task Force will be out to get you sooner rather than later. I will address other reasons why I believe the SEC will actively investigate StockTips.com and their promotions after I describe their prior and current promotions.

Past StockTips.com pump and dumps

I only signed up to StockTips.com late in 2012 year so I did not receive any promotional emails from them prior to December 2012. The first promotion I received from them was for Gold and Gemstone Mining (GGSM) and I only received one email about it at 10:59 AM Eastern on December 5th, 2012. The prior day Premiere Consulting (pennystockparlay.com and related websites, formerly affiliated with bestdamnpennystocks.com) had begun the promotion of GGSM and two days later they were done.

StockTips.com disclosure on GGSM:

StockTips.com is operated by Amerada Corp (AC).  Currently AC expects to be compensated $25,000.00 (Twenty-Five Thousand United States Dollars) from Laluna, Inc. for this GGSM advertising and promotion.

 

The second pump that I received from StockTips.com was about PacWest Equities (PWEI), which was promoted by Victory Mark Corp back in autumn 2012 and again by Victory Mark Corp and AwesomePennystocks.com in September 2013. Trading in the stock was quickly suspended due to the SEC crackdown on Awesomepennystocks.com and multiple blatantly false press releases.

While PWEI had been promoted back in the autumn of 2012 by Victory Mark Corp and by some lesser promoters, it received a new wave of promotion in February 2013. The new wave of promotion started February 10th with ImpressivePennyStocks.com / Todaypennystocks.com (paid $100,000 by Perfect Genius Investments, previously paid $100,000 by Green Meadow Enterprises back in 2012). Starting on February 11th, PWEI was promoted by StockExploder.com (paid $25,000 by Flip Ventures LLC). MicroCap Consultants LLC paid a few F-list promoters a few thousand dollars each to promote the stock at that time as well. Capital Financial Media also promoted PWEI and was paid $250,000 by Sancove Holdings Ltd.

I first received pump emails on PWEI at 8:00 PM Eastern on March 24th from StockTips.com. Their last email promoting it came at 11:44 AM on March 27th. Someone who bought PWEI on the first day and sold a week later could have easily lost 50%.

Compensation disclosed: $25,000
Paying party: Laluna Inc

Disclaimer for the PWEI pump below (click to enlarge):

The next StockTips.com pump and dump was AMMG, starting in July. But back in late May AMMG was promoted by a couple ineffective pumpers. I received pump emails after the close on May 21st from OTCPicks.com / PennyTrader news.net (paid $12,000 by Impexco Group). The last email sent by that promoter came on May 29th at 9:56 AM Eastern and then I received no emails promoting AMMG until StockTips.com promoted it.

The AMMG (Amarium Minerals) pump started after the market close on August 18th. It is quite obvious that volume was low (because StockTips.com’s previous pumps had never done well and had lasted only weeks) but then the stock broke out and hit a high of about $0.59 which is up over 100% from the median price on the first pump day of about $0.25. The last pump emails came on September 27th at 2:56 PM eastern.

Compensation disclosed: $25,000
Paying party: Laluna Inc

Here is the disclaimer from those emails (click to enlarge):

The PGLO (Pan Global) pump began after the market close on October 20th. Emails then came every trading day until November 6th, when an email was sent at 8:19 AM Eastern. After that email, no further emails were sent until November 14th at 1:53 PM Eastern. The final pump email was sent at 8:23 AM Eastern on November 19th. From a median price of about $0.35 on the first day to the high of the pump of about $0.96 on November 5th, the stock went up 170%.

Compensation disclosed: $1,100,000
Paying party: Laluna Inc

Below is the disclaimer sent with the emails (click to enlarge):

 

Tiger Oil and Gas (TGRO): The Current Stocktips.com pump & dump

The current stock promotion of StockTips.com is Tiger Oil and Energy, Inc (TGRO). Before describing the current promotion of TGRO I should mention its prior promotion back in January. It was promoted by Blue Lys Capital (WallstreetReport.net among other websites, paid $55,000) after the close on January 16th. Prior to the open the next day it was promoted by Andalusian Holding (FreeOTCPicks.com along with other websites, paid $55,000) and StockMister LLC (paid $15,000 by Cream Consulting). I received no further pump emails on TGRO after 2:20 PM Eastern on January 17th.

The current StockTips.com promotion of TGRO began on December 8th (a Sunday) and emails have come each trading day (or Sunday night). From a price of about $0.42 at 9:45am on the first trading day after the pump began TGRO hit a high of about $0.63 the next day for a potential gain of 50%.

Compensation disclosed: $2,500,000

Paying party: Laluna Services Inc

Below is the disclaimer from the emails promoting TGRO (click to enlarge):

The emails from StockTIps.com link to a video at http://www.stocktips.com/TGRO/ which then takes the viewer to http://www.stocktips.com/special-thank-tgro/ which links to the Invests.com page promoting TGRO.http://invests.com/opportunity-in-tigeroilandenergy-tgro

The disclaimer on that page says:

Invests.com expects to receive $1,250,000.00 for publication of this advertorial by StockTips.com.

PDF copy of Invests.com promotion page.

 

Why the SEC should have its sights set on StockTips.com

I have noticed several things about StockTips.com that make me believe that they are violating the law. These are all relatively small things that by themselves warrant no more than a slap on the wrist but they could indicate far bigger problems. If I worked for the SEC these would definitely make me think of investigating StockTips.com. First, the website discloses in all its emails that it is owned by Amerada Corp. In every email it lists its address as “4000 Aurora Avenue N. Ste. 119   Seattle, Washington 98103  US”. A quick search of corporations in Washington found only Amerada Petroleum Corp (a subsidiary of Hess Corporation, registered in Delaware). A search of Nevada and Delaware corporate registries found no companies with that name that currently exist (in Delaware an Amerada Corp. has been defunct since 1998). It is quite possible that the Amerada Corp that owns Stocktips.com exists in some other state and all this shows is a lack of proper disclosure or registration (using an address in Washington should mean that they have to file as a foreign corporation, in which case they would show up in the search I conducted).

The same question of the existence of Amerada Corp. can be asked of Laluna Inc — searches of the corporation registries of Washington, Nevada, and Delaware showed no potential matches. Furthermore, the name changed from Laluna Inc to Laluna Services Inc for the TGRO pump (all previous pumps listed “Laluna Inc” as the paying party. This makes it seem less likely that the company exists (although it is possible they made a typo but adding a “Services” to a company name is not a common typo). I should point out that while there are some foreign jurisdictions that do use “Inc.” or “Incorporated” that is much less prevalent than “Ltd.” or “Limited”.

Another suspicious fact about StockTips.com is that for every single stock promotion I have seen by them they have been paid by the same company, Laluna Inc (except for TGRO which was paid by Laluna Services Inc). Most promoters, when they do disclose who paid them, list a revolving door of common third-party promoter payers (such as Flip Ventures LLC), other promoters (such as MicroCap Consultants LLC) and entities that appear to be one-off entities created for one stock promotion.

I do have to admit that what I have described above is no more than what has seemed like ordinary stock promoter behavior over the last few years. But times have changed and the SEC’s Microcap Task Force has been kicking ass and taking names. Any prominent stock promoter that does anything even mildly suspicious is going to quickly find itself being investigated by the SEC. And any stock being promoted by such a promoter is at risk of a trading suspension.

[Edit 2013-12-16 3:20 PM]: In addition to what I described above, many of the large shareholders in TGRO have ties to recent pump and dumps such as NHUR and NVGC. See Ivan’s SeekingAlpha article and the Promotion Stock Secrets article on NGRC for details. In fact, TGRO CEO Kenneth B. Liebscher was criminally prosecuted in the past for stock fraud, although he was acquitted on all counts. The history of the CEO and the ties of large shareholders to other major pump and dump companies (including NHUR and NGRC) make it more likely that trading in TGRO be suspended by the SEC. See also the Promotion Stock Secrets blog post about TGRO.

 

 

Disclaimer: [Edit 2013-12-16: 3:20 PM — I am no longer net short TGRO but will soon be net short again] I am short TGRO and I intend to trade around my position (cover / reshort) in the following trading days and I will not update my disclaimer; 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.

The stock promotion of Makism 3D Corp (MDDD) had only been going for nine days and still the SEC suspended trading in the stock today prior to the market open. Just as with Life Stem Genetics, SeekingAlpha published a negative article on MDDD by StockRealist the day prior to the suspension.

 

The stock promotion of Guar Global (GGBL) began just last weekend. The SEC suspended trading in the stock today prior to the market open after only four days of promotion.

SEC trading suspension release
SEC trading suspension order

Just like with the suspension of trading of Sovereign Lithium (SLCO), the SEC highlighted potentially manipulative trading in the stock in addition to the standard concerns about adequacy of information about the company:

The Commission temporarily suspended trading in the securities of Guar Global because of
concerns regarding the accuracy and adequacy of information in the marketplace and potentially
manipulative transactions in Guar Global’s common stock.

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.

 

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.

This is hardly news to readers of this blog, but a Washington Post article from last week got some nice quotes from SEC officials giving some details on the pump and dump crackdown:

With a new chairman at its helm, and new chiefs leading the enforcement division, the agency created a 26-person task force in July devoted to rooting out microcap trading abuses. Since then, the agency has opened five or six microcap investigations a month, well above the previous year’s pace, agency officials said. The initiative builds on the efforts of a loosely-knit SEC working group created three years ago.

“For years, we did a number of these cases, but we didn’t attack it with a systematic approach,” said Andrew Ceresney, co-director of the SEC’s enforcement division. “We now have people focused on the area full-time for the first time, and by marshalling their expertise, we think we can make a difference.”

And the SEC has stated that they have purposely become more agressive in suspending trading in pump and dumps:

 

The agency said that going forward it will focus on repeat offenders, who account for a substantial amount of the fraud. It also is aggressively moving to suspend trading when it has reason to suspect misconduct. The agency has issued 90 trading suspensions so far this year, up 35 percent from the same period a year earlier. Most of the suspensions involved microcaps.

 

Full article at Washington Post.

 

Another day, another trading suspension of a big stock promotion. This time the ‘victim’ is Nevada Gold Corporation (NVGC). NVGC has been promoted by illegal spam emails from “StockCastle”. This trading suspension comes just two days after the previous trading suspension of a major active stock promotion, Life Stem Genetics.

Here is a chart of NVGC: 

George Sharp had also found a hard mailer promoting NVGC.

NVGC will reopen for trading on the grey sheets on December 12th.

From the trading suspension release:

The Commission temporarily suspended trading in the securities of NVGC because of questions
regarding the accuracy and adequacy of assertions by NVGC, and by others, to investors in press
releases and promotional material concerning, among other things, the company’s assets,
operations, and financial condition

 

SEC trading suspension release (pdf)
SEC trading suspension order (pdf)

 

Disclaimer: I am short 15,000 shares of NVGC at Interactive Brokers and I am long 10,000 shares at Speedtrader. I intend to exit those positions soon after the stock reopens for trading. I have no position in any other stock mentioned. I have no relationship with any parties mentioned above, other than that I am friendly with the author of the negative SeekingAlpha article on LIFS. 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.

Another day, another trading suspension of a big stock promotion. This time the ‘victim’ is Life Stem Genetics (LIFS). I previously blogged about that promotion on October 30th. This trading suspension comes just one week after the previous trading suspension of a major active stock promotion, Sovereign Lithium.

Here is a chart of LIFS:

 

The SEC’s trading suspension press release gave less detail than most about the reason for the trading suspension. LIFS will reopen for trading on the grey sheets on December 10th.

From the trading suspension release:

The Commission temporarily suspended trading in Life Stem because of questions regarding the
adequacy and accuracy of information about Life Stem, including, among other things, its
business operations.

 

SEC trading suspension release (pdf)
SEC trading suspension order (pdf)

 

Disclaimer: I am short 2153 shares of SLCO at Interactive Brokers that I intend to cover soon after the stock reopens for trading. I have no position in any other stock mentioned. I have no relationship with any parties mentioned above, other than that I am friendly with the author of the negative SeekingAlpha article on LIFS. 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.

Disclosure: I am short SLCO.

The string of suspensions of promoted stocks during the promotion or soon after continues with the SEC suspending trading in Sovereign Lithium Inc. (SLCO) last Friday. Judging by postings on InvestorsHub and Twitter, there was a new mailer promoting SLCO sent by James Rapholz’s Economic Advice. Despite the new ticker and name and mailer pump, the company has been around and was the subject of a mailer pump under the name Great American Energy and ticker SRBL starting back in February 2013.

Here is a chart showing the recent re-pump of SLCO:

And the chart below shows the previous pump as well:

 

While the SEC’s trading suspension press release included the usual language about “concerns regarding the accuracy and adequacy of information in the marketplace” it also highlighted “potentially manipulative transactions in Soverign Lithium’s common stock,” which is something rarely mentioned in these releases. The recent excellent article on TheStreet.com about promoter Awesomepennystocks.com (APS) mentioned that FINRA had sent “fraud surveillance section referral reports” to the SEC on numerous APS pumps. Perhaps after its slowness to act on the APS pumps came to light the SEC has decided to take a much closer look at manipulative trading in penny stock pump and dumps. If that is the case we should see a bunch more suspensions soon, likely including Pan Global Corp (PGLO).

 

From the trading suspension release:

The Commission temporarily suspended trading in the securities of Sovereign Lithium because
of concerns regarding the accuracy and adequacy of information in the marketplace and
potentially manipulative transactions in Sovereign Lithium’s common stock.

 

SEC trading suspension release (pdf)
SEC trading suspension order (pdf)

 

Disclaimer: I am short 2153 shares of SLCO at Interactive Brokers that I intend to cover soon after the stock reopens for trading. 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.