Another day, another Bitcoin-related penny stock trading suspension: American Security Resources Corp $ARSC

Just yesterday trading in First Bitcoin Capital Corp was suspended by the SEC. Today, the SEC suspended trading in American Security Resources Corp (ARSC).

SEC trading suspension release (PDF)
SEC trading suspension order (PDF)

The reason given for the trading suspension:

The Commission temporarily suspended trading in the securities of ARSC because of questions
that have arisen regarding publicly available information about the company in press releases on
OTCMarkets.com, dated August 1, and August 8, 2017, concerning, among other things, the
company’s business transition to the cryptocurrency markets and early adoption of blockchain
technology.

Following are links to and excerpts from the above-mentioned press releases:

American Security Resources Corp. (OTC PINK: ARSC) Officially Changes Name to Bitcoin Crypto Currency Exchange Corporation (August 1st, 2017)

HOUSTON, TX / ACCESSWIRE / August 1, 2017 / American Security Resources Corporation (OTC PINK: ARSC) is pleased to announce that the Company has officially changed its name to Bitcoin Crypto Currency Exchange Corporation in Nevada, the State of incorporation, as it prepares to enter the booming Crypto currency markets.

“We have decided to make this change to better reflect the new activities of our company. We have already taken steps to bring the company into compliance with OTC Markets and expect to have more announcements soon,” said CEO Frank Neukomm.

He further added, “The Company, today, has appointed Jay Jordon, Michel Beaulieu, and Duncan Brown to its Advisory Board as they have more than 50 years of combined experience in emerging digital technologies. We believe the Company is now positioned to aggressively pursue crypto-currencies and Bitcoin opportunities, and have changed our name to accurately reflect our new direction.”

Bitcoin Crypto Currency Exchange Corporation (OTC PINK: ARSC) Announces the Acquisition of Kachingpay.com

HOUSTON, TX / ACCESSWIRE / August 8, 2017 / Bitcoin Crypto Currency Exchange Corporation (OTC PINK: ARSC), formerly known as American Security Resources Corporation, announces today that it has acquired 100% of Kachingpay.com Incorporated (“KaChing”), in a cash and stock transaction. KaChing will be merged in to ARSC as a wholly owned subsidiary.

About Kachingpay.com:

KaChing is a smartphone-based payment and money transfer system created by Prometheus Software. KaChing is fast, free, and failsafe. KaChing recognizes that current user fees and charges with existing payment and money transfer systems are excessive. Today’s payment transactions and systems are burdened by their complexity and cost.

KaChing will drive down user fees and charges so that purchase payment processing will become a low cost, commodity utility. Using the free KaChing mobile app, consumers purchase tokens for their digital wallet. KaChing gift card tokens are then used for purchases with merchants. Consumers do not need credit cards, debit cards or specialized hardware. Merchants use existing hardware as well: computers, smartphones or tablets. KaChing uses Apple iOS and Android mobile devices for payment.

Management considers this acquisition significant as it provides a mobile front end on iOS and Android to the BitcoinMWallet mobile exchange platform for crypto currencies, which will be created by the Company.

 

ARSC will resume trading on the grey market (no market makers) at the open on September 11th.

 

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.

 

 

 

First Bitcoin Capital Corp $BITCF receives SEC trading suspension

This morning just prior to the market open the SEC issued a trading suspension for First Bitcoin Capital Corp (BITCF), which has a market cap of $545 milliion as of the most recent close of $1.79.

SEC trading suspension release (PDF)
SEC trading suspension order (PDF)

The reason given for the trading suspension:

because of concerns regarding the accuracy and adequacy of publicly available information about the company including, among other things, the value of BITCF’s assets and its capital structure.

My bet is that the news from August 2nd of BITCF preparing to pay a dividend in an illiquid cryptocurrency (TeslaCoilCoin) was one of the primary reasons for the trading suspension. The record date for that dividend was to be September 12th which is why I think the SEC acted now. After first posting this article Jacob Ma-Weaver mentioned that BITCF had issued a cryptocurrency version of its own stock and he thought that was the reason for the suspension. I had missed this initially and now agree with Jacob. From the company’s recent PR about the dividend, “We may also from time to time pay dividends in our own common shares in their crypto form which trades under the crypto symbol $BITCF on various foreign cryptocurrency exchanges.”

BITCF will resume trading on the grey market (no market makers) at the open on September 8, 2017.

While I did not follow $BITCF closely, there were plenty of red flags. Besides the usual lack of assets ($673,000 including their cryptocurrency holdings), there was having Anthony M. Santos as legal counsel. I didn’t recognize his name at first but he was attorney for NevWest, a key broker that processed the illegal sales of billions of shares of stock in CMKM Diamonds.

Disclaimer. No position in any stocks mentioned and I have no relationship with anyone mentioned in this post. New information was added to this post later on the day it was first published to give more reasons why BITCF may have been suspended. 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.

 

Environmental Packaging Technologies Holdings $EPTI to resume trading on July 13th after SEC trading suspension

Not long (13 days) after I blogged about the hard mailer promoting Environmental Packaging Technologies Holdings (EPTI) and uploaded a scan of the mailer, during premarket trading on June 28th the SEC suspended trading in the stock. It will resume trading on the grey market (no market makers) at the market open on July 13th, likely gapping down 90% or so.

SEC trading suspension release (PDF)
SEC trading suspension order (PDF)

The reason given for the trading suspension:

concerns regarding: (i) the accuracy and adequacy of publicly available information in the marketplace
since at least June 9, 2017 regarding statements in third party stock promotion materials pertaining to Environmental Packaging’s 2016 revenues, projected 2017 revenues, and the company’s buyout potential; and (ii) recent trading activity in the security that potentially reflects manipulative or deceptive activities.

While I would love to take credit for the SEC suspension of EPTI, that “The Commission acknowledges FINRA’s assistance in this matter” means that some broker(s) likely submitted SARs (suspicious activity reports) about potentially manipulative trading and that was the prime reason for the suspension.

 

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.

Environmental Packaging Technologies Holdings $EPTI promoted by 16-page mailer

The newest landing page pump out there is Environmental Packaging Technologies Holdings (EPTI). It has only been pumped for a week and volume is not great and it already crashed today but is bouncing back. A short seller such as I can only hope that the pump recovers and gets more volume so that it will be worth selling short (I currently have no position). The landing page is at: http://profitplaystocks.com/epti/index.html. Today I received a 16-page glossy mailer that I have scanned (pdf).

As of the company’s most recent 10-Q, filed on June 8, 2017, the company reported total assets of $475 and no revenues for the most recent quarter.

Disclosed budget: $1,000,000
Promoter:  Profit Play Stocks
Paying party: SVARNA LTD
Shares outstanding: 12,000,023
Previous closing price: $1.27
Market capitalization: $30 million

Disclaimer (emphasis added by me):

IMPORTANT NOTICE AND DISCLAIMER: DO NOT BASE ANY INVESTMENT DECISIONS UPON ANY MATERIAL FOUND IN THIS REPORT. This publication is distributed free of charge and does not purport to provide an analysis of a company’s financial position. The information contained herein has been prepared for informational purposes only and is not intended to be used as a complete source of information on any particular company, including Environmental Packaging Technologies Holdings (EPTI). Environmental Packaging Technologies Holdings’ (EPTI) financial position and all other information regarding (EPTI) should be verified with the company. An individual should not invest in the securities of (EPTI) based solely on information contained in this advertisement. Information about many publicly traded companies, including (EPTI) and other investor resources can be found at the Securities and Exchange Commission’s website: www.sec.gov. Investing in securities is highly speculative and carries significant risk. It is recommended that any investment in any security should be made only after consulting with your investment advisor and only after reviewing all publicly available information, including the statements of the company. This mailing piece is not intended to be, nor should it be construed as, an offer to sell or a solicitation of an offer to buy securities, nor should it be construed as the provision of any investment related advice or services tailored to any particular individual’s financial situation or investment objective(s). Profit Play Stocks is a publisher of general and regular circulations offering impersonalized investment-related research to readers and/or prospective readers and is not an investment advisor or broker/dealer registered with either the U.S Securities and Exchange Commission (SEC) or with any state securities regulatory authorities. Profit Play Stocks is neither licensed nor qualified to provide financial advice. As such, it relies upon the “publisher’s exclusion” as provided under Section 202(a)(11) of the Investment Advisors Act of 1940 and corresponding state securities laws. Investing in companies like (EPTI) carries a high degree of risk. Do not invest in this company unless you can afford to possibly lose your entire investment. The “Company” featured herein appears as paid advertising, paid by a third party to provide public awareness for (EPTI). The publisher, Profit Play Stocks, understands that in an effort to enhance public awareness of (EPTI) and its securities through the distribution of this mail and online advertisement, SVARNA, LTD. paid all of the costs associated with creating, printing, postage, and distribution of this advertisement. The publisher was paid the sum of ten thousand dollars for its contributions. The marketing vendors will be managing a total budget of one million dollars, provided by SVARNA, LTD. for all mail and online advertising and marketing efforts and will retain any amounts over and above the cost of production, copywriting services, mailing and other distribution expenses, as a fee for its services. If successful, the advertisement will increase investor and market awareness, which may result in increased numbers of shareholders owning and trading the common stock of (EPTI), increased trading volumes, and possibly increased share price of the common stock of (EPTI). The publisher has not undertaken to determine if SVARNA, LTD. Is, or intends to be, directly or indirectly, a shareholder of (EPTI). This publication is based exclusively on information generally available to the public and does not contain any material, non-public information. The information on which it is based is believed to be reliable; nevertheless, the publisher cannot guarantee the accuracy or completeness of the information. The information contained herein contain forwardlooking information within the meaning of section 27a of the Securities Act and section 21e of the Securities Exchange Act including statements regarding expected growth of The Company. In accordance with the safe harbor provisions of the Private Securities Litigation Reform Act, the publisher notes that statements contained herein that look forward in time, which include everything other than historical information, involve risks and uncertainties that may affect the Company’s actual results of operations. Factors that could cause actual results to differ include, but are not limited to, the size and growth of the market for the company’s products and services, the company’s ability to fund its capital requirements in the near term and long term, pricing pressures and other risks detailed in the company’s filed reports with SEC. To the fullest extent of the law, we will not be liable to any person or entity for the quality, accuracy, completeness, reliability, or timeliness of the information provided herein, or for any direct, indirect, consequential, incidental special or punitive damages that may arise out of the use of information we provide to any person or entity (including, but not limited to; lost profits, loss of opportunities, trading losses, and damages that may result from any inaccuracy or incompleteness of this information.

*Projection: Profit projection based on Environmental Packaging Technologies (EPTI) potential to match their competitor’s (Kirby Corporation: KEX) price surge.

Copy of pump landing page (PDF)

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.

SEC Sues Alpine Securities, continuing a run of bad news for owner John Hurry

As I wrote back in April, FINRA fined Scottsdale Capital Advisors $1.5 million for doing a really poor job at preventing illegal sales by penny stock insiders (FINRA Rule 2010). The owner, John J. Hurry, was barred from the industry. The full 111-page FINRA decision can be found on their website. Unfortunately FINRA prevents direct-linking so you need to go to http://disciplinaryactions.finra.org/Search/ and then enter “John Hurry” as the name. I have downloaded a copy of the decision in case they delete it.

From the FINRA report:

The Respondent firm violated FINRA Rule 2010 by selling securities without
registration and without an exemption, in contravention of Section 5 of the
Securities Act of 1933. The firm’s owner, Respondent John Hurry, also
violated Rule 2010, because he engaged in activities designed to enable the
unlawful transactions and evade regulatory scrutiny.

The Respondent firm and its Chief Compliance Officer, Respondent Timothy
DiBlasi, violated NASD Rules 3010(a) and (b) and FINRA Rule 2010 by
failing to establish and maintain a supervisory system, including written
supervisory procedures, reasonably designed to ensure that the firm
complied with Section 5 of the Securities Act.

The Respondent firm and its President, Respondent Michael Cruz, violated
NASD Rule 3010(b) and FINRA Rule 2010 by failing to supervise and failing
to respond appropriately to numerous red flags indicative of unlawful
unregistered distributions.

The Respondent firm is fined $1.5 million. Hurry is barred in all capacities.
He would also be fined $100,000, but, in light of the bar, the fine is not
imposed. DiBlasi is suspended for two years and fined $50,000. Cruz is
suspended for two years and fined $50,000. In addition, Respondents are
ordered to pay costs, for which they are jointly and severally liable.

From the same FINRA report, John “Hurry is a threat to the investment public.” The SEC must agree because on June 5, 2017 they sued Alpine Securities, which is another broker specializing in penny stocks owned by John Hurry.

The FINRA report on Scottsdale and Hurry describes the close relationship among them, Alpine Securities, and CSCT, which was based in the Cayman Islands.

Respondent Hurry thus owns and controls all three firms involved in the transactions at
issue in this proceeding-Scottsdale, Alpine, and CSCT. In fact, the three firms were almost a
self-contained system for processing and distributing microcap securities. CSCT did all its
business through Scottsdale, and Scottsdale in turn did all its business with Alpine. Alpine’s
current CEO described Alpine as a small”boutique” clearing firm with a focus on the kind of
business brought to it by CSCT. No independent third party was involved in preparing,
approving, or clearing the deposits of stock certificates by CSCT at Scottsdale for resale.

SEC litigation release against Alpine Securities
SEC complaint against Alpine securities (PDF)

From the litigation release against Alpine Securities:

Securities and Exchange Commission v. Alpine Securities Corporation

Civil Action No. 7:17-CV-4179 (S.D.N.Y., filed June 5, 2017)

SEC CHARGES BROKERAGE FIRM WITH FAILING TO COMPLY WITH ANTI-MONEY LAUNDERING LAWS

Washington D.C., Jun. 5, 2017 – The Securities and Exchange Commission today charged a Salt Lake City-based brokerage firm with securities law violations related to its alleged practice of clearing transactions for microcap stocks that were used in manipulative schemes to harm investors.

To help detect potential securities law and money-laundering violations, broker-dealers are required to file Suspicious Activity Reports (SARs) that describe suspicious transactions that take place through their firms. The SEC’s complaint alleges that Alpine Securities Corporation routinely and systematically failed to file SARs for stock transactions that it flagged as suspicious. When it did file SARs, Alpine Securities allegedly frequently omitted the very information that formed the bases for Alpine knowing, suspecting, or having reason to suspect that a transaction was suspicious. As noted in the complaint, guidance for preparing SARs from the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN) clearly states that “[e]xplaining why the transaction is suspicious is critical.”

The SEC’s complaint charges Alpine Securities with thousands of violations of Section 17(a) of the Securities Exchange Act of 1934 and Rule 17a-8.

From the complaint, the SEC alleges:

This case concerns Alpine’s practices relating to filing Suspicious Activity
Reports (“SARs”) with the U.S. Treasury Department’s Financial Crimes Enforcement Network
(“FinCEN”). Alpine acts as a clearing firm for many microcap over-the-counter (“OTC”) stock
transactions. Since 2011, Alpine has cleared thousands of deposits of microcap securities, most
of them involving Scottsdale Capital Advisors Corp. (“Scottsdale”) as the introducing broker,
and many of which were used as part of various stock manipulation and other schemes

Alpine’s alleged failures with regard to filing suspicious activity reports (SARs) seem egregious:

Systematically omitting from at least 1,950 SARs material, “red-flag” information of
which it was aware and was required to report under its own BSA Compliance
Program, such as a customer or issuer’s criminal or regulatory history, evidence of
stock promotion, or whether a customer was a foreign financial institution, including
at least 1,150 SARs which included only the customer name, date of deposit, dollar
value of deposit, and the name of the security deposited;
• Filing SARs only on the deposit of stock in approximately 1,900 instances in which
the stock was subsequently liquidated, but failing to file required SARs on subsequent
related transactions such as the liquidation, or transfer of funds resulting from the
liquidation, even though it had identified the deposit of the security as suspicious; and
• Failing to file at least 250 SARs within the required 30 days after the date the
suspicious activity was detected.

Alpine has previously been investigated and cited by FINRA for inadequate SARs in 2012 and 2015.

Lest anyone think that these are just minor paperwork deficiences with no real consequences, I remind you that one pump and dump alone, Biozoom (BIZM), led to over $17 million in fraudulent profits for manipulators / insiders, and many of their accounts were at Scottsdale Capital Advisors.

One interesting thing I noticed: this lawsuit against Alpine Securities came on June 5th, which is exactly the day that the bar against a couple employees of Scottsdale Capital Advisors began. From the FINRA complain from April (emphasis mine):

V. CONCLUSION

The Firm, Scottsdale Capital Advisors, violated FINRA Rule 2010. Accordingly, it is
ordered to pay a fine of$ 1.5 million. John J. Hurryviolated FINRA Rule 2010. For his
misconduct he is barred from association with any FINRA member in any capacity. He would be
fined $100,000, but, in light ofthe bar, the fine is not imposed. Timothy B. DiBlasi violated
NASD Rules 3010(a) and (b) and FINRA Rule 2010. For his misconduct, he is suspended for
two years from association with any FINRA member in any capacity and fined $50,000. D.
Michael Cruz violated NASD Rule 3010(b) and FINRA Rule 2010. For his misconduct, he is
suspended for two years from association with any FINRA member in any capacity and fined
$50,000.

Respondents are also ordered to pay costs in the amount of$22,124.29, which includes a
$750 administrative fee and $21,374.29 for the cost of the transcript. If this decision becomes
FINRA’s final disciplinary action, Hurry’s bar will take immediate effect. DiBlasi’s and Cruz’s
suspension will begin with the opening of business on June 5, 2017 The fines and assessed costs
shall be due on a date set by FINRA, but not sooner than 30 days after this decision becomes
FINRA’s final disciplinary action in this proceeding.

 

Disclaimer. I have no position in any stock mentioned above. I was long BIZM when trading in it was suspended by the SEC and lost money because of that. 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.

 

 

 

 

 

 

 

Drone Guarder $DRNG now pumped for two weeks via landing page

Starting on May 30th, Drone Guarder (DRNG) started trading with good volume. It is being promoted via emails and a landing page at wallstreetblaze.com/drng/index.html There are 30 million unrestricted shares that can potentially be dumped into this stock promotion while 102 million shares are restricted (data from OTCMarkets.com). This is starting to look pretty interesting as a potential short although the stock looks tightly controlled / manipulated.

Under the company’s previous ticker VOPA it was first promoted back in November 2016.

As of the company’s most recent 10-Q, filed on June 8, 2017, the company reported total assets of $40,111 and no revenues for the most recent quarter.

Disclosed budget: $300,000
Promoter:  Wall Street Blaze
Paying party: Optimal Access Pte LTD
Shares outstanding: 26,805,270
Previous closing price: $1.19
Market capitalization: $158 million

Disclaimer (emphasis added by me):

Disclaimer: DO NOT BASE ANY INVESTMENT DECISIONS UPON ANY MATERIAL FOUND IN THIS REPORT. This publication is distributed free of charge and does not purport to provide an analysis of a company’s financial position. The information contained herein has been prepared for informational purposes only and is not intended to be used as a complete source of information on any particular company, including Drone Guarder (DRNG). DRNG’s financial position and all other information regarding DRNG should be verified with the company. An individual should not invest in the securities of DRNG based solely on information contained in this advertisement. Information about many publicly traded companies, including DRNG and other investor resources can be found at the Securities and Exchange Commission’s website: www.sec.gov. Investing in securities is highly speculative and carries significant risk. It is recommended that any investment in any security should be made only after consulting with your investment advisor and only after reviewing all publicly available information, including the statements of the company. This mailing piece is not intended to be, nor should it be construed as, an offer to sell or a solicitation of an offer to buy securities, nor should it be construed as the provision of any investment related advice or services tailored to any particular individual’s financial situation or investment objective(s). Wall Street Blaze is a publisher of general and regular circulations offering impersonalized investment-related research to readers and/or prospective readers and is not an investment advisor or broker/dealer registered with either the U.S Securities and Exchange Commission (SEC) or with any state securities regulatory authorities. Wall Street Blaze is neither licensed nor qualified to provide financial advice. As such, it relies upon the “publisher’s exclusion” as provided under Section 202(a)(11) of the Investment Advisors Act of 1940 and corresponding state securities laws. Investing in companies like DRNG carries a high degree of risk. Do not invest in this company unless you can afford to possibly lose your entire investment. The “Company” featured herein appears as paid advertising, paid by a third party (Optimal Access Pte LTD) to provide public awareness for DRNG. The publisher, Wall Street Blaze, understands that in an effort to enhance public awareness of DRNG and its securities through the distribution of this mail and online advertisement, Optimal Access Pte LTD paid all of the costs associated with creating and distribution of this advertisement. The publisher was paid the sum of five thousand dollars for its contributions. The marketing vendors will be managing a total budget of three hundred thousand dollars, provided by Optimal Access Pte LTD for all online advertising and marketing efforts and will retain any amounts over and above the cost of production, copywriting services, mailing and other distribution expenses, as a fee for its services. If successful, the advertisement will increase investor and market awareness, which may result in increased numbers of shareholders owning and trading the common stock of DRNG, increase trading volumes, and possibly increased share price of the common stock of DRNG. The publisher has not undertaken to determine if Optimal Access Pte LTD is, or intends to be, directly or indirectly, a shareholder of DRNG. This publication is based exclusively on information generally available to the public and does not contain any material, non-public information. The information on which it is based is believed to be reliable; nevertheless, the publisher cannot guarantee the accuracy or completeness of the information. The information contained herein contain forward-looking information within the meaning of section 27a of the Securities Act and section 21e of the Securities Exchange Act including statements regarding expected growth of The Company. In accordance with the safe harbor provisions of the Private Securities Litigation Reform Act, the publisher notes that statements contained herein that look forward in time, which include everything other than historical information, involve risks and uncertainties that may affect the Company’s actual results of operations. Factors that could cause actual results to differ include, but are not limited to, the size and growth of the market for the company’s products and services, the company’s ability to fund its capital requirements in the near term and long term, pricing pressures and other risks detailed in the company’s filed reports with SEC. To the fullest extent of the law, we will not be liable to any person or entity for the quality, accuracy, completeness, reliability, or timeliness of the information provided herein, or for any direct, indirect, consequential, incidental special or punitive damages that may arise out of the use of information we provide to any person or entity (including, but not limited to, lost profits, loss of opportunities, trading losses, and damages that may result from any inaccuracy or incompleteness of this information.

Copy of pump landing page (PDF)

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.

Sung Hong & Hyun Joo Hong arrested for allegedly defrauding churches and others in purported forex trading scheme

Quoting from the DoJ press release:

          According to records filed in the case, the HONGs recruited investors using religious organizations and shared religious beliefs. The couple claimed that LAURENCE HONG privately invests money for wealthy Korean families and that GRACE HONG holds a Series 65 securities license and previously worked for a large international investment firm. None of these statements appear to be true. Nor was LAURENCE HONG’s past history disclosed. The couple sent potential customers misleading and false investment prospectuses that contained an inaccurate record of their past investment performance and other plagiarized investment outlooks. They further misled investors as to the advisor fees they would charge and the amount of their funds that would be at risk.

The HONGs used investor funds for their own benefit. One church in California invested $1 million with the HONGs and lost about $300,000 on a single trade. Still, despite the steep losses and a fee arrangement based on investment gains, the HONGs withdrew almost $150,000, ostensibly as advisor fees, from the church’s account. Another couple allowed the HONGs to manage their $180,000 in retirement funds only to lose $100,000 within less than a year. After meeting with the HONGs, that couple then invested their remaining retirement funds in the HONGs’ hedge fund, only for those funds to be redirected into GRACE HONG’s personal account. The HONGs used those funds to pay credit card bills and other personal expenses, including a $16,000 payment to a resort in the Bahamas for a HONG family vacation.

Investigators have identified over $2 million in additional losses in several other investor accounts managed by the HONGs. The financial investigation to date has revealed investor money was used to pay for the HONGs’ extravagant lifestyle, which included a 9,000 square foot rental home in Clyde Hill; a 45-foot yacht; multiple high-end vehicles, such as BMWs, a Maserati, and a Lamborghini; and lavish vacations.

See more details:
DoJ Western District of Washington press release
Commodity Futures Trading Commission (CFTC) press release

This is another case where a modest amount of due diligence would have protected the investors. The Sung Hong was previously arrested for fraud. I remember the first time I looked to invest in a company and my minimal due diligence revealed that the CEO William Telander had spent three years in prison for stock fraud (involving alchemy!). Needless to say I did not invest. Google is your friend. Also, if considering investing, make sure to read the fine print, make sure that the money is held at an independent custodian, and make sure that the money manager is licensed or otherwise legally allowed to manage money.

Caveat emptor, as always.

 

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.

 

SEC Announces trading suspension of Eco Science Solutions $ESSI

This morning prior to the market open the SEC issued a trading suspension for Eco Science Solutions (ESSI), which has a market cap of $107 million.

SEC trading suspension release (PDF)
SEC trading suspension order (PDF)

The reason given for the trading suspension:

concerns regarding the accuracy and adequacy of publicly disseminated information concerning, among other things, ESSI’s proposed acquisition of Ga-Du Bank, Inc.

Eco Science Solutions issued a press release about acquiring Ga-Du Bank Inc on May 5th. Below is the full text of that PR:

Eco Science Solutions, Inc. Signs Letter of Intent to Acquire Specialty Banking Operation

MAUI, HI–(Marketwired – May 5, 2017) – Eco Science Solutions, Inc. (OTCQB: ESSI), an eco-technology Company providing solutions to the multi-billion-dollar health, wellness and alternative medicine industry, today announced that it has signed a Letter of Intent with Ga-Du Bank, Inc. for the purpose of acquiring full ownership of the Bank in a stock and cash transaction.

Upon the closing of the transaction, ESSI will operate the Bank as a wholly-owned subsidiary of Eco Science Solutions, Inc. ESSI will own and operate a financial banking division providing payment processing, cash management and financial services to its customers in the cannabis industry.

Additionally, the Bank’s principals have engaged with prospects in the marketplace whom have made expressions of interest, along with preliminary commitments to deposit sums between Three-Hundred and Six-Hundred Million Dollars ($300,000,000 and $600,000,000). These amounts are currently being projected to be deposited within the first sixty to one-hundred-eighty days following the acquisition of the Bank by ESSI.

“All parties involved are enthusiastic about the Bank’s potential to financially serve the cannabis marketplace. Current business owners working in medical marijuana are doing a tremendous job, but are truly in need of formal banking services so they can soundly manage their business finances,” stated John Lewis, who is both the current president of the Bank and a Governor of the Central Bank of SCNRFP. Mr. Lewis continued with, “By combining Ga-Du Bank with Eco Science Solutions, we see how our synergies will create an important financial institution to serve a category that is in need of a fully integrated vertical product suite.”

“Our entire team is thrilled by the prospect of the acquisition of the Ga-Du Bank by ESSI,” said Andy Tucker, Senior Advisor to of Ga-Du Bank. Mr. Tucker continued, “We believe that in joining forces with the ESSI team, we can deliver a comprehensive suite of financial products that addresses the current needs of currently what is a cash-driven industry, allowing ESSI to become a break-out leader for the sector.”

“It has been our vision from day one that, in order to fully service the cannabis industry and execute on our business plan, we needed to be creative in securing and offering a banking platform that further differentiates us from everyone in our category,” stated Jeff Taylor, Chief Executive Officer of Eco Science Solutions, Inc. Mr. Taylor continued, “The deal with Ga-Du Bank is a game-changer for not only ESSI, but everyone in the cannabis industry. This new division of our Company will put us years ahead of our goal to create a full-service marketplace among growers, suppliers, distributors, retailers and consumers.”

About Eco Science Solutions, Inc.

With headquarters in Maui, Hawaii, Eco Science Solutions, Inc. is a technology-focused Company targeting the multi-billion-dollar health, wellness and alternative medicine industry.

From enterprise software, to consumer applications for daily use, the Company develops technical solutions that empower enthusiasts in their pursuit and enjoyment of building eco-friendly businesses and living healthy lifestyles.

Eco Science’s core services span localized communications between consumers and business operators, social networking with like-minded enthusiasts, rich educational content, e-commerce, and rapid delivery of products, all catering to the health-and-wellness lifestyle.

Forward-Looking Statements

Legal Notice Regarding Forward-Looking Statements in this news release that are not historical facts are forward-looking statements that are subject to risks and uncertainties. Forward-looking statements are based on current facts and analyses and other information that are based on forecasts of future results, estimates of amounts not yet determined, and assumptions of management. Forward looking statements are generally, but not always, identified by the words “expects”, “plans”, “anticipates”, “believes”, “intends”, “estimates”, “projects”, “aims”, “potential”, “goal”, “objective”, “prospective”, and similar expressions or that events or conditions “will”, “would”, “may”, “can”, “could” or “should” occur. Information concerning oil or natural gas reserve estimates may also be deemed to be forward looking statements, as it constitutes a prediction of what might be found to be present when and if a project is actually developed.

Actual results may differ materially from those currently anticipated due to a number of factors beyond the reasonable control of the Company. It is important to note that actual outcomes and the Company’s actual results could differ materially from those in such forward-looking statements. Factors that could cause actual results to differ materially include misinterpretation of data, inaccurate estimates of oil and natural gas reserves, the uncertainty of the requirements demanded by environmental agencies, the Company’s ability to raise financing for operations, breach by parties with whom we have contracted, inability to maintain qualified employees or consultants because of compensation or other issues, competition for equipment, inability to obtain drilling permits, potential delays or obstacles in drilling operations and interpreting data, the likelihood that no commercial quantities of oil or gas are found or recoverable, and our ability to participate in the exploration of, and successful completion of development programs on all aforementioned prospects and leases. Additional information on risks for the Company can be found in the Company’s periodic filings filed from time to time with US Securities and Exchange Commission at www.sec.gov.

Eco Science Solutions, Inc.
www.ecossi.com
[email protected]
800-379-0226
Copyright © 2017 Marketwired. All Rights Reserved

ESSI will resume trading on the grey market (no market makers) at the open on June 6, 2017.

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.

Pump & dump Global Quest Limited $GLBB receives SEC trading suspension

This morning prior to the market open the SEC issued a trading suspension for Global Quest Limited (GLBB), which has been promoted over the last few weeks and which has risen from $1 to $5.65 to give it a market cap of $56 million market capitalization.

SEC trading suspension release (PDF)
SEC trading suspension order (PDF)

The reason given for the trading suspension (emphasis mine):

The Commission temporarily suspended trading in the securities of GLBB because of concerns regarding the accuracy and adequacy of information in the marketplace, including on Global Quest’s website, regarding the company’s business operations. This order was entered pursuant to Section 12(k) of the Securities Exchange Act of 1934 (Exchange Act).

The Commission acknowledges FINRA’s assistance in this matter.

While there may have been others promoting Global Quest, one promoter was Wall Street Giants. Here is an excerpt from their disclaimer:

This release is not without bias, and is considered a conflict of interest if compensation has been received by WSG for its dissemination. To comply with Section 17(b) of the Securities Act of 1933, WSG shall always disclose any compensation it has received, or expects to receive in the future, for the dissemination of the information found herein on behalf of one or more of the companies mentioned in this release. For current services performed WSG has been compensated one million two hundred thousand dollars for coverage of the current company (GLBB) featured by a non-affiliated third party. WSG HOLDS NO SHARES OF GLOBAL QUEST LTD (OTC: GLBB).

GLBB will resume trading on the grey market (no market makers) at the open on May 26, 2017.

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.

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.