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The SEC has charged 15 people and 19 entities for their roles in alleged schemes to manipulate microcap stock trading.

The 34 defendants include six firms alleged to have acted as unregistered broker-dealers catering to customers who sought to conceal their stock ownership and manipulate the market for microcap securities.

Read: SEC suspends trading in 128 companies

Owners and employees at the six firms, several customers, stock promoters, and two microcap issuers – Warrior Girl Corp. and Nature’s Peak, formerly Everock, Inc.  –  also are among the defendants in the case filed in federal district court in Manhattan.  The SEC charged the defendants with fraud, manipulative trading, touting, and with registration violations.  Nine of the defendants were named in a criminal indictment charging them based on their roles in the alleged stock manipulation scheme.

The SEC complaint alleges that Costa Rica-based Moneyline Brokers and its founder Harold Bailey “B.J.” Gallison II unlawfully operated as a broker-dealer for U.S.-based customers who engaged in “pump and dump” schemes to artificially inflate a stock’s price and then sell their own shares. According to the complaint, Moneyline and certain of its employees routinely accepted transfers of microcap stocks from the U.S. customers and had stock certificates reissued in Moneyline’s name to conceal the true owners of the shares.

Read: SEC charges 2 Canadians with penny stock fraud

Carl H. Kruse Sr. and Carl H. Kruse Jr., both of Miami, allegedly conspired with Moneyline and others to manipulate trading in Warrior Girl, a former shell company that the Kruses controlled. Warrior Girl’s purported business changed from hydroelectric power (in 2008) to extracting oil from tar sands (in 2009) to online education (in 2010), and the Kruses allegedly engaged in multiple manipulations to profit from promotions to inflate the stock’s price. As a result of the various campaigns the Kruses are alleged to have obtained illegal profits estimated to total US$2.3 million.

Another alleged scheme involved trading in Everock, Inc., a Canada-based mining company that relocated to Nevada and sold sandwich spreads after reorganizing itself with Nature’s Peak in 2008.  A concerted campaign promoting the mining-turned condiment company allegedly included videos and Facebook postings and produced more than US$2.5 million in profits for defendants Charles S. Moeller, of Sea Cliff, N.Y., Mark S. Dresner, of Dix Hills, N.Y. and Frank J. Zangara, of Locust Valley, N.Y.

In addition to Moneyline, the complaint alleges that two Costa Rica-based firms, Sandias Azucaradas CR, S.A. and Vanilla Sky, S.A., and three Nevada-based firms, Bastille Advisors, Inc., Club Consultants, Inc., and Jurojin, Inc., operated as unregistered broker-dealers.  Employees of the firms who were charged are: Roger G. Coleman Sr., of Las Vegas, Ann M. Hiskey, of Costa Rica, Robin M. Rushing and David K. Rushing, both of Spokane, Wash., and Michael J. Randles, of Costa Rica.

Read: SEC issues scam alert over marijuana microcaps

Promoters who were charged include: Dresner, Antonio J. Katz, of Red Bank, N.J., Moeller, Richard S. Roon, of Rumson, N.J., AKAT Global LLC, Digital Edge Marketing LLC, Oceanic Consulting LLC, and Spectrum Research Group Inc.

The other defendants charged are: Allan M. Migdall, of Fort Lauderdale, Florida, Robert S. Oppenheimer, of Belvedere Tiburon, Calif., Core Business One, Inc., Bermuda-based Fry Canyon Corp., L.F. Technology Group LLC, Starburst Innovations LLC, and Tachion Projects, Inc., along with B.H.I. Group, Inc. and U D F Consulting Inc., both of New York.

The SEC is seeking return of allegedly ill-gotten gains with interest from all defendants.  It also is seeking civil monetary penalties from nearly all the defendants and seeks to bar nearly all of them from the penny stock business and bar some of them from serving as public company officers or directors.

Originally published on Advisor.ca

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