The US Securities and Exchange Commission has charged 16 defendants, located in the Bahamas, the British Virgin Islands, Bulgaria, Canada, the Cayman Islands, Monaco, Spain, Turkey, and the UK, for participating in multi-year fraudulent penny stock schemes that generated more than $194m in illicit proceeds.
The SEC investigations leading to these charges involved assistance from securities regulators and other law enforcement authorities in more than 20 countries and are associated, in part, with parallel criminal actions announced by the United States Attorney's Office for the Southern District of New York.
Gurbir S. Grewal, director of the SEC's Division of Enforcement, said: "We allege that the defendants in these actions orchestrated some of the most complex microcap stock fraud schemes ever charged by the SEC.
"By locating their operations overseas, using encrypted messaging and operating through a convoluted network of offshore accounts, the defendants hoped to avoid detection of the massive frauds we allege they perpetrated on US markets and investors.
"However, investigative teams from three SEC offices doggedly kept on their trail, working across borders, and ended this alleged global scheme."
The SEC's complaints, filed in the United States District Court for the Southern District of New York, charged all of the defendants with violating the antifraud and registration provisions of the federal securities laws.
The charges, contained in three separate complaints, allege that several defendants played a variety of roles to accumulate the majority of shares in penny stocks via difficult to unveil, offshore nominee companies.
It is also alleged that some of the defendants frequently used encrypted text and phone applications to avoid detection by regulators, and arranged to buy and sell penny stocks from multiple offshore accounts, in furtherance of the fraud.
According to the complaints, once some of the defendants had amassed a significant majority of the shares of the stocks, certain defendants secretly funded promotional campaigns to promote the stocks to unsuspecting investors in the United States and elsewhere.
As alleged, when those campaigns triggered increases in the demand for and price of the stocks, some of the defendants sold the stocks via trading platforms in Asia, Europe and the Caribbean for significant profits.
The SEC is seeking permanent injunctions, disgorgement of allegedly ill-gotten gains plus interest, and civil penalties against all the defendants; penny stock bars against all the individual defendants; conduct-based injunctions against 11 of the 15 individual defendants; and officer and director bars against eight of the individual defendants.
On the emergency applications, the Court issued orders on April 12 and April 15 freezing and directing repatriation of the assets of six defendants.
The SEC further highlighted the assistance of the US. Attorney's Office for the Southern District of New York, the Federal Bureau of Investigation, and the Financial Industry Regulatory Authority.
The investigations also involved assistance from the following securities regulators and other government authorities:
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