SEC alleges Canadians exploited Covid-19 in pump-and-dump scheme

By James Langton | June 12, 2020 | Last updated on June 12, 2020
2 min read

U.S. authorities have charged a group of Canadians with operating an alleged pump-and-dump scheme that exploited the Covid-19 outbreak.

The U.S. Securities and Exchange Commission (SEC) filed an emergency action and secured an asset freeze order against five Canadians and six offshore companies for carrying out an alleged fraud that is said to have generated more than US$25 million from illegal sales of multiple microcaps.

The SEC alleged that, starting in January 2018 — if not sooner — Nelson Gomes, Michael Luckhoo-Bouche and others enabled corporate insiders to conceal their identities while dumping their company’s stock into the market.

The regulator alleged that these illegal stock sales were often boosted by campaigns to first hype the stocks, including recent efforts that included false and misleading claims designed to capitalize on the Covid-19 pandemic.

For instance, one of the promotional efforts included claims that a company could produce medical-quality face masks. Another firm was said to operate automated kiosks for retailers to use in response to the pandemic.

Three other Canadians — Shane Schmidt, Douglas Roe and Kelly Warawa — were also charged with fraudulently dumping shares.

Additionally, Schmidt faces criminal charges in Massachusetts in connection with the scheme. He was charged with one count of securities fraud and one count of conspiracy to commit securities fraud.

According to the charges brought by the U.S. Attorney’s Office for the District of Massachusetts, Schmidt impersonated the president of a penny stock company, Sandy Steele Unlimited, Inc. (SSTU), as part of the alleged pump-and-dump scheme.

U.S. authorities alleged that “Schmidt provided fraudulent information to the stock quotation service OTC Markets,” including a fake passport impersonating the fictitious company president, “John Scott.” It is also alleged that Schmidt set up a website for the company that used false and misleading pictures.

“Schmidt allegedly took these steps in order to enable SSTU’s stock to trade via OTC Markets, to generate interest in the stock, and to share in the proceeds of stock sales, which he later did,” U.S. authorities alleged.

None of the allegations has been proven.

The SEC’s complaint, filed in federal district court in Boston, charges the five Canadians and various offshore companies with violations of federal securities laws.

The SEC is seeking permanent bans, civil penalties and disgorgement of allegedly ill-gotten gains, among other sanctions.

“Microcap stocks can be particularly vulnerable to manipulative schemes, and investors should be alert to the heightened risks that exist during this national emergency,” said Paul Levenson, director of the SEC’s Boston office.

“The SEC will continue to act quickly to protect investors from investment scams, including those seeking to capitalize on the Covid-19 crisis,” Levenson added.

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James Langton

James is a senior reporter for and its sister publication, Investment Executive. He has been reporting on regulation, securities law, industry news and more since 1994.