June 17, 2019
The SEC recently settled charges against Andrew I. Farmer of Katy, Texas, Scott R. Sieck of Winter Park, Florida, Eddie D. Austin, Jr. of Houston, Texas, Carolyn P. Austin of Houston, Texas, and John D. Brotherton of Conroe, Texas (heretofore referred to as “Group”) for a series of pump-and-dump fraudulent schemes involving several penny stocks.
According to the SEC Complaint, between at least May 2011 and May 2017, the Group obtained control of all freely trading stock of a penny stock and then allocated the stock to foreign and domestic front companies they controlled. From Spring 2014 to Spring 2017, the issuers targeted for this pump-and-dump scheme included Puget Technologies (PUGE), Gankit Corporation (GANK), Nhale, Inc. (NHLE), Horizon Energy Corp. (HORI), and Valmie Resources, Inc. (VMRI). The Group then allegedly coordinated trading with these penny stocks and launched materially misleading promotional campaigns through email blasts and internet advertising to build hype and create the false appearance of market interest and set artificially elevated share prices. The SEC alleges the Group unloaded the worthless stock on unsuspecting investors when the stock price and trading volume rose.
As part of the settlement, the Group consented to the entry of final judgments which enjoin them from violating provisions of the federal securities laws, enjoin them from future solicitation of the purchase or sale of securities, impose officer-and-director bars, impose penny stock bars, and order the Group to disgorge $10.25 million of ill-gotten gains and prejudgment interest totaling $895,487. The Group pleaded guilty in a parallel criminal action.