Showing posts with label IPO. Show all posts
Showing posts with label IPO. Show all posts

Saturday, August 16, 2014

SEC BRINGS CHARGES IN ALLEGED PUMP-AND-DUMP SCHEME INVOLVING OIL-AND-GAS TECHNOLOGY COMPANY

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION

The Securities and Exchange Commission today announced charges against a Houston-based penny stock company and four individuals behind a pump-and-dump scheme that misled investors to believe the company was on the brink of developing revolutionary technology to enable environmentally friendly oil-and-gas production.

The SEC alleges that Andrew I. Farmer orchestrated the scheme by creating a shell company called Chimera Energy, secretly obtaining control of all shares issued in an initial public offering (IPO) in late 2011, and launching an aggressive promotional campaign midway through 2012 to hype the stock to investors.  Chimera Energy issued around three dozen press releases in a two-month period about its supposed licensing and development of technology to extract shale oil without the perceived environmental impact of hydraulic fracturing known as fracking.  However, Chimera Energy did not actually license or even possess the technology it touted and had not achieved the claimed results in commercially developing it.  While the stock was being pumped by the false claims, entities controlled by Farmer dumped more than 6 million shares on the public markets for illicit proceeds of more than $4.5 million.

The SEC suspended trading in Chimera Energy stock in 2012 and prevented Farmer and his associates from dumping additional shares or misleading new investors into their scheme.
In addition to Chimera Energy and Farmer, the SEC’s complaint charges a pair of figurehead CEOs installed by Farmer.  The SEC alleges that Charles E. Grob Jr. and Baldemar Rios approved the misleading press releases and operated Chimera Energy at the minimum level necessary to lend the company a veneer of legitimacy while concealing Farmer’s involvement altogether.  The SEC’s complaint also charges Carolyn Austin with helping Farmer profit from his scheme by dumping shares of Chimera Energy stock in the midst of the promotional efforts.
“Farmer and his accomplices secretly rigged the market for Chimera Energy stock and illegally profited by exaggerating the company’s capabilities and technology,” said David Woodcock, director of the SEC’s Fort Worth Regional Office.  “They seized on fracking as a topic of public discourse and aggressively touted an entirely fictitious business to attract unwitting investors.” 
According to the SEC’s complaint filed yesterday in federal court in Houston, Farmer obtained control of all 5 million shares of Chimera Energy stock issued in the IPO by disguising his ownership through the use of nominee shareholders.  Farmer’s name and the nature of his control over the company were not disclosed to investors in any of Chimera Energy’s public filings.  Following the IPO, Farmer directed the press release barrage along with an Internet advertising campaign designed to increase investor awareness of Chimera Energy’s claims.  The initial press release issued by the company on July 30, 2012, sported the headline: CHMR Unveils Breakthrough Shale Oil Extraction Method to Safely and Effectively Replace Hydraulic Fracturing.

The SEC alleges that Chimera Energy disclosed in public filings that an entity named China Inland had granted the company an “exclusive license to develop and commercialize cutting edge technologies related to Non-Hydraulic Extraction.”  The technology that China Inland purportedly licensed to Chimera Energy was described as an “environmentally friendly oil & gas extraction procedure for shale to replace hydraulic fracturing.”  The SEC’s investigation found that the purported acquisition of a license to develop such technology and the license agreement itself are entirely fictitious.  No legitimate entity known as China Inland even exists. 
The SEC’s complaint charges Chimera Energy, Farmer, Grob, Rios, and Austin with securities fraud, registration violations, and reporting violations.  The SEC seeks permanent injunctions, disgorgement with prejudgment interest and financial penalties, penny stock bars, and officer-and-director bars.

The SEC’s investigation, which is continuing, has been conducted by Nikolay Vydashenko and Eric Werner in the Fort Worth Regional Office.  The SEC’s litigation will be led by Matthew Gulde and Mr. Vydashenko.  The SEC appreciates the assistance of the Financial Industry Regulatory Authority.

Friday, March 28, 2014

SEC HALTS PONZI SCHEME TARGETING ASIAN AND LATINO COMMUNITIES

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION

The Securities and Exchange Commission today announced charges and asset freezes against the operators of a worldwide pyramid scheme targeting Asian and Latino communities in the U.S. and abroad.

The SEC alleges that three entities collectively operating under the business names WCM and WCM777 are posing as multi-level marketing companies in the business of selling third-party cloud computing services, which can include website hosting, data storage, and software support.  The entities are based in California and Hong Kong and controlled by “Phil” Ming Xu, who is a resident of Temple City, California.

According to the SEC’s complaint filed in federal court in Los Angeles, WCM and WCM777 have raised more than $65 million since March 2013 by falsely promising tens of thousands of investors that the return on investment in the cloud services venture would be 100 percent or more in 100 days.  Investors were told they would receive “points” for making investments or enrolling other investors.  The points would be convertible into equity in initial public offerings of high-tech companies their money would help launch.  However, rather than building out cloud services or incubating high-tech companies, Xu and the WCM entities used investor funds to make Ponzi payments of purported investment returns to some investors.  They also spent investor money to purchase golf courses and other U.S.-based properties among other unauthorized expenditures.

The court has granted the SEC’s request for an asset freeze and the appointment of a temporary receiver over the assets of WCM, WCM777, and several other entities named as relief defendants for the purpose of recovering money from the scheme in their possession.

“Xu and his entities claimed they were using investor funds to build a strong cloud services company that would then ignite other high-tech companies and ultimately make their investors very wealthy,” said Michele Wein Layne, director of the SEC’s Los Angeles Regional Office.  “In reality, they were operating a pyramid scheme that preyed on investors in particular ethnic communities, leaving them with nothing left to show for their investment.”

According to the SEC’s complaint, WCM and WCM777 sell their products exclusively to investors and have no other apparent sources of revenue.  Their offerings and operations depend almost entirely on the recruitment of new investors and purchases by existing investors to provide the money for returns.  On its website, WCM777 specifically addressed the question “Is WCM777 a Ponzi Game?” by writing, “In summary, we are not a Ponzi game company. We are creating a new business model.”

The SEC alleges that Xu and his entities made various false claims to investors about purported partnerships with more than 700 major companies such as Siemens, Denny’s, and Goldman Sachs – in some instances falsely representing that they had permission to use their logos.  Meantime, besides buying two golf courses with investor money, Xu and his entities also purchased a warehouse, vacant land, and several single family homes  They also used investor funds to play the stock market and make other related investments through intermediary companies, such as an oil and gas offering.  They also sent investor money to a rough diamond jewel merchant in Hong Kong and another unrelated company affiliated with Xu.

The SEC’s complaint alleges that WCM, WCM777, and Xu violated Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934, and Rule 10b-5.  The complaint further alleges that Xu violated Section 20(a) of the Exchange Act.  In addition to the asset freezes and appointment of a temporary receiver, the Honorable Christina A. Snyder also granted the SEC’s request for an order prohibiting the destruction of documents and requiring the defendants to provide accountings. A court hearing has been scheduled for April 10, 2014.

The SEC’s investigation has been conducted by Peter Del Greco, Maria Rodriguez, and Marc Blau of the Los Angeles office.  The SEC’s litigation will be led by John Bulgozdy.  

Search This Blog

Translate

White House.gov Press Office Feed