SEC Charges Promoter with Penny Stock Market Manipulation Scheme
The Securities and Exchange Commission (“SEC”) charged a public company promoter and his company with conducting a scheme to manipulate trading in at least 97 penny stocks.
According to the SEC’s complaint filed November 28, 2018, Eric Landis arranged with third party advertisers for publicly traded, small (often relatively infrequently traded) companies (a/k/a “microcap” companies) to distribute promotional materials for the stocks using email lists, when in fact there were no distribution lists. From the SEC’s perspective, Landis manipulated the market by creating the mirage that those companies’ securities were in high demand by trading thousands of microcap shares himself using brokerage accounts in his own name, in the name of an entity he controlled, Ridgeview Capital Partners LLC (“Ridgeview”), and in the names of several third parties. His goal was to induce others to trade in the securities by infusing the securities markets with false information concerning supply and demand of the penny stocks he was paid to promote.
The director of the SEC’s Boston Regional Office, Paul Levenson, gives this warning to penny stock investors, “microcap investors should know that sometimes market volume in a particular stock can be driven by a single fraudulent actor, as alleged here.”
The SEC’s complaint charges Landis and Ridgeview with violating the antifraud and market manipulation provisions of the securities laws. The SEC is requesting a permanent injunction stopping Landis from engaging in these practices in the future, disgorgement of all ill-gotten gains from the unlawful conduct with other penalties, and prohibiting him from participating in any offering of a microcap stock.
How could Landis have generated demand for public companies’ stock legally? Well, he shouldn’t have been buying and selling stock in companies that he had no interest in investing in. This is a recipe for fraud.
Wilson Bradshaw & Cao, LLP is a boutique securities law firm in Irvine California and New York City. We help businesses solicit investors for both public and private companies in a compliant manner. We restrict our practice to securities law, focusing on private and public offerings and SEC enforcement work.