Microcap fraud continues to be the key theme this week in securities enforcement litigation. In the most recent case the U.S. Attorney’s Office for the District of Massachusetts secured the indictment of a Swiss resident alleged to be at the center of international pump-and-dump actions that have yielded over $160 million in the past three years. U.S. v. Knox, No. 1:8-cr-10385 (D. Mass.).
Roger Knox is a U.K. national residing in Switzerland. He was indicted on one count of securities fraud and one count of conspiracy to commit securities. The indictment followed his arrest earlier this month.
Mr. Knox ran a firm initially known as Silverton but later renamed as Wintercap. It claimed to be an asset manager. In fact the firm served as a vehicle for selling massive amounts of penny stock on behalf of so-called “control groups” — those who secretly own large blocks of penny stocks through a variety of entities and accounts. The transactions were made in conjunction with campaigns by those who actually controlled the shares that are designed to artificially inflate the share price and trading volume. Stated differently, Mr. Knox facilitated international pump-and-dump manipulation schemes, according to the charges.
In the end Mr. Knox channeled the funds back to persons in the “control groups” located in the United States and other jurisdictions. The trading profits were thus returned to those who controlled the shares. The case is pending. See also SEC v. Knox, Civil Action No. 1:16-cv-12858 (D. Mass.).