SEC Files Another Scalping Case
One of key area of focus for the Commission’s enforcement division over the years has been microcap stocks. Often the float for those firms is small and the share price low, facilitating market manipulation. Social media only enhances those attributes since it facilitates the communication often needed to manipulate the market. That ability was key in the Commission’s latest action in this area, SEC v. Beck, Civil Action No. 2:22-cv-00812 (C.D. Ca. Filed February 7, 2022).
Defendant Michael Beck has a twitter account with the handle “@BigMoneyMike6”. He is also the founder of email group TeamBillionaire. Named as a relief defendant is Helen Robinson, his mother.
Mr. Beck has as many as 3 million followers for his Twitter handle. Over a two year period, beginning in 2017, Defendant used his handle and significant following to manipulate eight microcap stocks by conducting a scalping scheme.
Key to scalping is acquiring a stock position with the firm, then moving the price up and later selling prior to the other investors – it is built on non-disclosure by the trader who does not reveal the stock about to be touted is one he owns. In this case Mr. Beck began each scheme by purchasing a block of shares of a penny stock. Typically, the shares were acquired by a nominee, here his mother.
The second step of the manipulation was built on the Twitter following. Mr. Beck would tweet out to his followers and the public that he would soon be issuing a new stock recommendation or an Alert. Frequently, he would notify the members of TeamBillionaire to encourage then to purchase prior to other members of the public. In some instances, Defendant paid select investors to make favorable statements prior to his recommendation.
Following these steps Mr. Beck would tweet out his stock recommendation. The share price would rise as the volume and trading climbed. Defendant Beck then sold his shares. By repeating this procedure with eight different stocks over the two-year period, Defendant Back realized gains of about $870,000. The complaint alleges violations of Exchange Act Section 10(b) and Securities Act Section 17(a). The case is pending. See Lit. Rel. No. 25325 (February 7, 2022).