SEC says brokerage accounts hijacked for $1.3m pump-and-dump scam
18 people and businesses charged, one giant web of connections
America's financial watchdog has accused 18 individuals and shell companies of using compromised brokerage accounts to manipulate stock prices to rake in $1.3 million in illicit profits.
According to the SEC complaint, fraudsters in the US, Canada, and the Dominican Republican broke into at least 31 American-owned retail brokerage accounts in late 2017 and early 2018.
They then used the compromised accounts to make large purchases of Lotus Bio-Technology Development and Good Gaming stock, which artificially inflated the trading price and volume of those stocks, the SEC alleged. The miscreants named by the regulator already controlled large blocks of stock and cashed in after the share prices jumped.
"The defendants sold the shares they had acquired at the inflated prices, generating approximately $1.3 million in proceeds and creating substantial profits for the defendants," according to the SEC complaint [PDF], filed in an Atlanta federal district court.
In addition to the hacking and price manipulation, some of the scammers also allegedly tried to hide their ownership of Lotus Bio-Tech and Good Gaming shared by, among other things, using offshore accounts and not filing beneficial ownership reports with the SEC, as required by law, the court was told.
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"Our complaint details a brazen and sophisticated scheme, with hackers using international accounts and dummy account holders to hide their tracks," said Nekia Hackworth Jones, director of the SEC's Atlanta regional office, in a statement.
The SEC charges against the group include violations of the anti-fraud and beneficial ownership reporting provisions of the Securities Act of 1933 and the Securities Exchange Act of 1934. It also seeks the return of ill-gotten gains plus interest, penalties, bars, and other equitable relief.
Individuals and companies charged in connection with the alleged hacking-and-securities-fraud scam (sidenote: you will need to dedicate an entire wall to create an evidence board and keep all of these connections straight) include:
- Avatele Group, based in Wyoming and managed by Richard Tang, whose wife Anna Tang is also allegedly involved.
- Jeffrey Cox, 56, who lives in Calgary, Alberta, Canada. He served as president and CEO of First Calgary Capital, which offered "investor relations" services and "awareness" campaigns for microcap companies.
- Harmony Ridge Corp, which was wholly owned by Richard Tang.
- H.E. Capital, which is based in the Dominican Republic. Another defendant, Richard Smith, is H.E. Capital's co-founding director and was its 50 percent owner during the relevant periods. The SEC also believes Smith's son Christopher Smith was H.E. Capital's secretary, and Robert Seeley ran the firm's day-to-day operations. Both are named as defendants.
- Glenn Laken, 68, who lives in Chicago, Illinois, and is president, chairman, and controlling shareholder of CMG Holdings Group, which was, in turn, the controlling shareholder of Good Gaming — at least in May 2017. Laken was convicted of securities fraud in connection with a stock promotion scheme in the early 2000s and served a 63-month federal prison sentence.
- Maximum Ventures Holdings, a privately held Wyoming entity that was owned by Anna Tang, and jointly controlled by both of the Tangs.
- Christophe Merani, 31, who lives in Glendale Heights, Illinois and is an associate of Sewell, who worked with David Wong.
- Rahim Mohamed, age 45, of Calgary, Alberta, Canada, and the Cayman Islands. He is also the owner of Nexium Financial and the CEO and chairman of Softlab9 Technologies. Mohamed also controls or controlled a brokerage firm in the Cayman Islands called White Sands Securities.
- Zoltan Nagy, 55, lives near Vancouver, British Columbia, Canada and has ties to Point Roberts, Washington. Nagy founded Lotus Bio-Tech and, according to the SEC, and has been its controlling shareholder, although he divested himself on at least one occasion. Plus, he was also the sole officer and director of microcap public company Black Rock Petroleum, a spin-off of Lotus Bio-Tech.
- POP Holdings is a privately held Nevis entity based in the Dominican Republic and owned by Christoper Smith, who served as its president and his father, Richard Smith, was the firm's secretary. Meanwhile, Seeley, we're told, ran the day-to-day operations.
- Robert Seeley, 48, is a British citizen who lives in the Dominican Republic and worked with the Smiths as an authorized signatory on some H.E. Capital and POP brokerage accounts.
- Phillip Sewell, 61, is a British citizen who lives in Vancouver, BC, Canada and co-founded Catalyst Capital Group, a privately held Canadian financial advisory firm, with Davies Wong.
- Christopher Smith, 52, is a British citizen who lives in the Dominican Republic.
- Richard Smith, age 78, is a British citizen who lives in the Dominican Republic.
- Anna Tang, 43, lives in Richmond, BC, Canada.
- Richard Tang, 44, also lives in Richmond, BC, Canada and is married to Anna Tang.
- Breanne Wong, 33, is a Canadian citizen who lives in Panama and Vancouver, BC, Canada. She formerly was a stockbroker for a Panamanian brokerage firm.
- Davies Wong, 62, lives in Vancouver, BC, Canada, and, we're told, is Breanne Wong's father and Anna Tang's cousin. He co-founded Catalyst Capital with Sewell, served as its CEO and is also the president and owner of Fusion Business Group.
And here's the abbreviated version of how the various family members, friends and fraudulent businesses worked together to try to pull off the international scam, allegedly:
Davies Wong and Glenn Laken controlled the majority of the Lotus Bio-Tech and Good Gaming stock that was sold while Mohamed hacked into the accounts, it is claimed. Mohamed also allegedly coordinated with the Wongs, Laken, and others to orchestrate the attacks, it is said. Meanwhile, Richard Tang was involved with both the Lotus Bio-Tech and Good Gaming schemes, it's claimed. ®