The Provincial Court of Alberta has sentenced Caroline Meyers, the principal of Calgary-based International Securities Group Inc., to two years in prison for her role in the 2010 market manipulation of the securities of Coastal Pacific Mining Corp.
In December 2015, Meyers pleaded guilty to acting as a dealer of securities without registration, not filing a prospectus, and falsely inflating prices for Coastal Pacific stock.
Her co-accused, Joseph Bucci, also pleaded guilty to the same charges in September 2015.
Bucci received an 18-month conditional sentence and permanent market bans in Alberta's first court sentence handed down in a "pump-and-dump" scheme.
Meyers is the second such sentence, and the first that carries a jail sentence. Meyers, who is also known as Winsor, Danforth and Winsor-Meyers, recently returned to Canada from the U.S., where she served time in jail on similar fraud charges.
Provincial Court Judge Skene ordered that Meyers be permanently banned from:
- trading in and purchasing securities or derivatives of publicly traded or quoted issuers;
- using any exemptions in Alberta securities laws; and
- acting in a management or consultative capacity in connection with activities in the securities market.
Fraud on the rise, say officials
"Penny stock fraud ('pump-and-dump' scheme) is a serious and growing problem in North America, undermining the integrity of our capital markets and inflicting tens of millions of dollars in damage to unsuspecting victims," said Cynthia Campbell, Alberta Securities Commission director of enforcement.
"These activities create artificial demand by distorting the price of shares through falsehoods and exaggerations of company success.
"Perpetrators cash in on the falsely inflated prices, halt the misinformation and watch as the share price comes crashing to the ground. Innocent purchasers are left holding essentially worthless shares," Campbell said.
How to spot a pump and dump scheme
Pump and dump schemes usually involve penny stocks that are quoted on the over-the-counter markets.
They typically start with promoters drawing attention to a stock through press releases, investment blogs and newsletters.
They will promote their stock as "the next big thing", along with other misleading statements to get investors to buy in.
The promotion inflates the stock volume and price, and the stock price typically rises as more investors buy into the hype.
What investors don't know is that the promoters own a large number of shares and once the stock price peaks, the promoters sell their shares, depressing the price, leaving investors with shares that are nearly worthless.