RE:Quebec's stock market regulator can go after Canada's Panama
dalesio_98 wrote: Quebec's stock market regulator can go after Canada's Panama Papers kingpin, Supreme Court rules Province's AMF sought 5-year ban and $2M fine on Fred Sharp over alleged role in pump-and-dump scheme
Fascinating read
It reminds you, and provides details, of how promoters are able to profit off a pump and dump scheme and trick retail investors.
From the linked article and proceedings:
"Defendants manipulated the stocks of at least nine microcap issuers.
2. As set forth in more detail below, the Defendants’ scheme for each stock followed
the same general formulation, which is often referred to as a “pump-and-dump” fraud. The
Case 1:22-cv-03096 Document 1 Filed 04/14/22 Page 1 of 32
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Defendants and their associates obtained a controlling interest in the securities of a microcap
issuers through a series of transfers and purchase agreements with nominee shareholders. The
Defendants then used a network of offshore entities and brokerage accounts (“Offshore Trading
Platforms”, discussed further below) to deposit the shares in mostly offshore brokerage firms,
and in accounts that were not in their own names but rather were in the names of the Offshore
Trading Platforms or nominee entities.
3. Not only did the Defendants and their associates hide their control of the issuers
through the accounts and the nominee entities they used, but they also sought to hide their
control of these issuers by dividing up the shares in separate accounts such that none of the
accounts held more than 5 percent of the issuer’s outstanding float. By doing so, the Defendants
deceived the public, brokers, and regulators by knowingly avoiding the disclosure obligations of
Section 13(d) of the Securities Exchange Act of 1934, which would have informed investors of
their control of the issuers.
4. Once they had secretly obtained control of these issuers, the Defendants then
engaged in fraudulent schemes to profitably sell their shares.
5. The Defendants engaged in promotional activity such as sending emails and
setting up websites touting the stocks. The purpose of the promotional activity was to generate
interest among investors to purchase shares, and thereby generate liquidity into which the
Defendants profitably sold their shares.
6. The Defendants paid stock promoters clandestinely through conduit entities.
None of the promotional materials disclosed that the promotions were funded by people who
controlled the relevant issuer nor that those individuals would be selling their stock during the
“pump.”
Case 1:22-cv-03096 Document 1 Filed 04/14/22 Page 2 of 32
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7. In addition, in advance of the promotional activity, the Defendants often directed
trading activity to increase trading volume. Their purpose was to induce innocent investors to
purchase the stock, based on the contrived appearance of active investor interest in the issuer.
8. After the “pump,” the Defendants “dumped” their stock. These sales were in
violation of the registration requirements of the federal securities laws, as the sales were not
registered with the Commission, and were not exempt from registration.
9. The Defendants’ stock sales were treated by the market as if they were sales by
ordinary investors, when, in actuality, the Defendants were dumping stock into the securities
markets on behalf of an undisclosed control group in violation of the laws governing such sales.
10. The Defendants then used the Offshore Trading Platforms, and other foreign
entities and bank accounts under their control, to distribute the sale proceeds."