SEC Charges UK Broker, Others With Manipulation
Since a priority for the Commission’s Enforcement Program is retail investors, a key area of focus is microcap fraud. Recently the agency filed two related microcap fraud actions centered on an FBI sting operation. SEC v. Beaufort Securities Litd., Civil Action No. 2:18-cv-01317 (E.D.N.Y. Filed March 2, 2018); SEC v. Mancino, Civil Action No 3:18-cv-01316 (E.D.N.Y. Filed March 2, 2018).
The first action names as Defendants Beaufort Securities, a U.K. registered brokerage firm, and Panayiotis Kyriacou, an investment manager at the firm. In 2016 an undercover FBI agent introduced himself to Mr. Kyriacou. The Agent indicated he was a stock promote, according to the complaint.
In December 2017 the Agent told Mr. Kyriacou that he was working on a deal involving U.S. OTC traded HD View 360 Inc. The goal was to create the appearance that the stock was actively traded. The investment manager suggested matched trades, something he claimed to do frequently.
In early 2018 Mr. Kyriacou arranged for the Agent to enter four purchase orders for HD View. The Agent agreed, noting that he had arranged for others to take the opposite side of the trades. In early January the Agent had the investment manager submit two purchase orders to the market for HD View shares. One order was executed. It also most doubled the price of the stock. Orders sent to market and executed the next day did not have any impact. Two additional orders were placed the next month as part of the scheme but had no price impact. The intent of each order, however, was to engage in matched trades to create the appearance of activity. The Agent did not arranged for the matched trades. The complaint alleges violations of Exchange Act Section 10(b). The case is pending.
The second action names as Defendants: Dennis Macino, the President, CEO and a Director of HD View; William Hirschy, the CEO of WT Consulting Group, LLC; TJM Investments, Inc. whose CEO is Mr. Macino; DJK Investments 10 Inc., a firm affiliated with Mr. Macino; and WT Consulting, a firm through which Mr. Hirschy conducted his trading activity.
From January 2017 through the end of the year Defendants Macino and Hirschy utilized their controlled entities to engage in matched trades and manipulate the shares of West Coast Ventures Group Corp., a firm whose shares were traded on OTC Link. From at least February 2017 through September of that year the two men engaged in a similar manipulative scheme involving the shares of HD View 360, Inc. .
In the fall of 2017 an under cover FBI Agent introduced himself to Messrs. Mancino and Hirschy as a stock promoter. He claimed to be connected to a group of off-shore brokers with trading discretion. The Agent told the two men that his group could buy stock in exchange for a kickback. The three men eventually entered into an arrangement under which the Agent would arrange for the discretionary accounts to purchase stock in exchange for a 40 to 50% kickback. The point of the trading was to effect an artificial price. Two companies were identified in connection with the scheme – HD View and West Coast.
In late 2017 and early 2018 the Agent and Defendants Mancino and Hirschy had a series of telephone calls regarding their arrangement. The Agent recorded the conversations. On January 31, 2018 a test trade was made to make sure that the Agent’s brokers were able to purchase the shares of HD View. The trade was arranged in a telephone call. An order was placed and the Agent directed the broker at Beauford Securities in the U.K. (see above) to enter a matching order. The order was entered. The price of HD View almost doubled. The complaint alleges violations of Securities Act Section 17(a)(1) and Exchange Act Sections 9(a) and 10(b). The case is pending.
Program: Insights Into SEC Enforcement, is roundtable discussion of the Former Directors of the SEC’s Division of Enforcement that will be held on April 3, 2018 beginning a 4:30 p.m. at Georgetown University Law School. The program will be followed by a reception. Registration is available here without charge. The program is sponsored by the SEC Historical Society, the Federal Bar Association, and the Association of SEC Alumni.