Alleged Microcap Fraudsters Charged by SEC in Market Manipulation Schemes


Unlawful Stock Sales — Pump, Dump and Run

The Securities and Exchange Commission charged a group of 10 corporate entities and 10 individuals for their participation in a long-running and complex fraud scheme.

The fraud conspiracy allegedly generated over $27 million in illicit gains from unlawful stock sales. In the end, the actions taken by both the corporate entities and individuals caused substantial harm to retail investors, whose stock was virtually worthless.

According to the SEC’s complaint, the South Florida-based individuals operated the scheme from 2013 to 2018. Their leader, Barry Honig, manipulated the share price of the stock for three different companies; he did so in the pure “pump-and-dump” style, whereby the value of the underlying company stock was artificially inflated, and then sold immediately thereafter.

Miami biotech billionaire Phillip Frost allegedly participated in two of the three fraud schemes.

In the schemes, Honig allegedly orchestrated the acquisition of large quantities of the issuer’s stock at deep discounts. In doing so, Honig secured a substantial ownership interest for himself in each of the companies. At that point, Honig and his associates engaged in illegal promotional activity and manipulative trading schemes to artificially boost each issuer’s stock price.