Virginia Pump & Dump Case Reminds Investors: Beware of Age-Old Schemes

Destiny A. Lopez |

Once every few years, a major financial scheme makes national headlines. Within the past 10 years, among others, Marc Dreier, Tom Petters, Bernie Ebbers, and Bernie Madoff, were former financial professionals that will be forever remembered for their financial crimes, ranging from fake promissory notes to Ponzi schemes. However, scams and schemes are a common occurrence in the finance world. While seasoned investors may be able to spot a questionable opportunity a mile away, newbies must remember to proceed with caution. Due to a recent case in Virginia, let’s look at another kind of investment scheme: pump and dumps.

Reported today by Stockwatch, Michael Randles, with his trial scheduled for November 7, 2016, has filed a motion challenging key recordings and e-mails that form part of the evidence against him in the Moneyline Brokers pump-and-dump case, claiming that the U.S. government obtained the information without a search warrant.

Randles was a manager at Moneyline, a Costa Rican firm that, according to the government, aided promotional campaigns and anonymously sold shares through several U.S. brokerages on behalf of others. The motion comes over a year after the government first charged Randles and others for the scheme.

Along with Randles, other defendants in the criminal case include:

  • Frank Zangara, 53, of New York
  • Charles Moeller, 46, of New York
  • Roger Coleman, 79, of Las Vegas
  • Anna Hiskey, 42, of Costa Rica
  • Carl Kruse Sr., 75, of Miami
  • Carl Kruse Jr., 50, of Miami

A form of microcap stock fraud, “pump and dump” schemes, according to Investopedia, attempts to boost the price of a stock through recommendations based on false, misleading or greatly exaggerated statements. There's a scene from Boiler Room that nails how pump and dumps operate (skip to 0:57 in video).




In the case of Moneyline and Randles, two particular stocks were named in their scheme: Everock Inc. (EVRN), a subpenny mining company,and Bryn Resources Inc. (BRYN), a Toronto company. According to Stockwatch, the SEC cited Randles for the following:

  • Everock was domiciled in Ontario, moving to Nevada at some point. The promotion, as described in the complaint, began on March 22, 2010, when an on-line tout sheet called the OTC Reporter started covering Everock. At the time the company had recently changed its business, and claimed to have a deal in which a natural foods supermarket had approved its products for sale. The tout sheet called the company the "next huge move" that could have a "plan for growth into a new economy.
  • Meanwhile Moneyline was carrying out matched trades in Everock behind the scenes, the SEC claimed. (The stock had become very active by this time, briefly shedding subpenny status to reach a 1.44-cent high in April, 2010. Within five months it was once again well under a penny, trading around 0.2 cent.) Over the course of the Everock manipulation, accounts at Moneyline earned $2.5-million selling the stock at inflated prices, the SEC said.

The scary thing about financial scams, from an email asking for personal information in order to claim a lottery prize to that “sure thing” on Wall Street, is that, if not paying attention for the warning signs, anyone could be become a victim. Remember the tout sheet mentioned earlier that referred to Everock as the “next huge move?” This language is one of the many red flags to look out for when keeping an eye out for pump and dumps. Reverse mergers, pink sheets, email spam, along with other traits, are more tactics or behaviors that should raise suspicions for small cap investors.

Email us if you think a stock is a pump and dump so we can look at these with you here content@equities.com

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DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
EVRN Everock Inc 0.00 0.00 0.00 0
BRYN Bryn Resources Inc 0.00 0.00 0.00 0

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