SEC Charges Several South Florida Residents in Penny Stock Fraud Scheme
On September 7th, 2018, the Securities and Exchange Commission (SEC) announced fraud charges against ten different individuals in relation to a penny stock fraud scheme. The charges were filed in the United States District Court for the Southern District of the New York. According to the SEC’s complaint, the ten individuals were implicated in the securities fraud scheme included:
- Barry C. Honig of Boca Raton, FL;
- John Stetson of Fort Lauderdale, FL;
- John R. O’Rourke III of Fort Lauderdale, FL;
- Michael Brauser of Lighthouse Point, FL;
- Mark Groussman of Miami Beach, FL;
- Phillip Frost of Miami Beach, FL;
- Robert Ladd of Raleigh, NC;
- John H. Ford of Bolinas, CA;
- Elliot Maza of New York, NY; and
- Brian Keller of California.
In addition to these ten people, the SEC also named ten associated companies and investment entities. Here, our Miami investment fraud lawyers provide an overview of the allegations raised by the federal regulators and law enforcement officials.
Allegations of Market Manipulation and Microcap Fraud
The SEC alleges that the individuals named in this complaint engaged in “brazen” market manipulation. The relevant time period in this case runs from 2013 through the early part of 2018. It was during that time that the SEC alleges that Barry Honig led a scheme to manipulate the stock price of at least three different microcap securities. Notably, famed Miami-based billionaire entrepreneur Phillip Frost is alleged to have participated in two of the three fraud schemes.
Pump and Dump Penny Stock Fraud
According to the complaint, Mr. Honig organized the purchase of large amounts of microcap stocks at a steep discount. After securing large interests in these companies, the SEC believes that he worked with his co-conspirators to promote and manipulate the underlying share price. To do this, the perpetrators used certain trading patterns that were designed to make it appear as though the stock’s had large trading volumes when they really did not. As soon as the market inflated based on this false and fraudulent information, Mr. Honig and his co-conspirators dumped all of their shares.
The SEC is Seeking Sanctions
The men are alleged to have taken in more than $27 million at the expense of innocent, unsuspecting investors. In effect, this scheme was a typical ‘pump and dump’ operation. The SEC is alleging a long list of different securities law violations. The agency is seeking appropriate sanctions, including:
- Payment of full financial restitution;
- Disgorgement of any and all ill-gotten gains; and
- The prohibition on all defendants from engaging in any future penny stock offerings;
Get Help From Our Miami Investment Fraud Lawyers Today
At Carlson & Associates, P.A., we are proud to fight for the rights of investors. Our law firm has extensive experience handling penny stock fraud claims. We will protect you. If you or your family member was a victim of penny stock fraud in South Florida, please call us at our Miami law office to arrange a confidential review of your investment fraud claim.