What's up guys and welcome back to wall street millennial on this channel, we cover everything related to stocks and investing today we're covering one of the biggest pump and dumps in recent history, which was recently uncovered by the sec. This was a highly sophisticated scheme that spanned multiple continents and lasted for almost a decade. In total, it facilitated hundreds of penny stock pump and dumps which generated gross proceeds in excess of one billion dollars. These pump and dumps cost individual investors to the tune of at least tens of millions of dollars.

There are multiple people involved and they allegedly orchestrated a complex network of shell companies and encrypted communications to hide their illegal activities from law enforcement. As of august of 2021. This scheme has finally been uncovered by the sec and u.s attorney's office, and the masterminds now face up to 20 years in prison on charges of securities fraud in this video we'll go over. What the scheme was, how much money and illicit profits were gained by the perpetrators and how it was able to go undetected for so long before we get into the video make sure to follow us on twitter, where we post about current events in the stock market.

The link is in the description below. If you don't already know a pump and up is a form of securities fraud typically done with penny stocks. An investor buys up shares then disseminates false or misleading information to convince other investors to buy the stock once the price has been bid up. He dumps his holdings for a profit to maximize the profits from the scheme.

The investor behind the pump and dump will usually own millions of dollars worth of shares, which will make up large portions of the penny. Stock's shares outstanding. This can lead to a problem for the mastermind if he or she owns too much of the company. This can trigger regulatory reporting requirements which will put them on the sec's radar.

Since brokerage accounts are tied to the owner's name. It is very easy for the sec to identify investors who are making suspicious trades. This greatly limits the scale at which people can perform pump and dumps, while avoiding detection. According to the sec.

Around 2011, a canadian man by the name of frederick l sharp, saw an opportunity to make millions of dollars by helping others avoid detection whilst performing pumped numbs. He, along with a couple of associates, set up a network of offshore shell companies. Sharp's clients were people who wanted to buy up large sticks and penny stock companies and perform pump and notes. They could transfer their holdings to the shell companies and route them through a swiss asset management company to dump the socks without triggering reporting requirements to the sec.

Of course, this is completely illegal, but sharp carefully set up the structure in such a way that it was difficult to detect by the regulators the sec recently named three canadian residents by the names of mike bedoui, paul sexton and jackson friesen as frequent customers of sharp Services now that they had the infrastructure to dump their penny stocks, the last piece of the puzzle is finding a way to pump up the stock price. To this end, they conspired with a mainland resident by the name of william caves, who is a professional stock promoter. His job was to do whatever it took to convince retail traders to buy the penny stocks that these guys wanted to pump and know he created so-called boiler rooms, which were basically call centers. They would use for their pumps, they would cold call unsuspecting investors telling them about how good the penny stocks were and trying to convince them to buy them.

They used false and misleading statements, high pressure sales tactics and failed to disclose that their co-conspirators were planning to dump millions of shares after the price pumped. While all this was happening, the perpetrators knew what they were doing was illegal and carried the potential for serious prison time they communicated with each other on a closed network with blackberry phones provided by sharp the mastermind in canada. They also referred to each other by code names so as not to leave any evidence of their personal involvement. The operation was surprisingly professional, sharp maintained a detailed accounting system to keep track of the pump and gnomes and distribute the ill-gotten gains to the relevant parties.

The u.s attorney's office of massachusetts eventually identified four specific stocks that were used in these schemes. It's important to remember that the companies themselves may be completely innocent in the affair. The fraudsters can pump any penny stock that they choose just by buying the shares on the secondary market. It is not necessary for the management teams of the targeted penny stock companies to have any knowledge of, or involvement in the schemes.

These stocks included vitality, biopharma one life technology, corporation germatek's holdings and pure snacks international. They generated proceeds of almost 17 million dollars by dumping vitality biopharma in the roughly two dollar share price range: the stock now trades for 56 cents on the over-the-counter markets they made. Five million dollars of proceeds from selling shares of one life technology in 2017 and 2018.. They were able to pump the price above two dollars per share at the peak in november of 2017., the stock currently trades for point zero, two cents and has a market cap of twenty thousand dollars.

The other ones are all pretty similar. They just choose tiny penny stocks, whose prices can be easily moved; they swindle retail investors into buying them and dump them for millions of dollars worth of profits at the time. Since these penny stocks were quite small, they could only make a few million dollars from each pump and node to scale up the operations. They repeated similar schemes to hundreds of different penny stocks between 2011 and 2019.

The sec estimates that this criminal syndicate generated gross proceeds in excess of 1 billion dollars from penny stock sales sharp's program was so effective that attracted customers from multiple continents. Individuals from mexico and the united kingdom also allegedly used sharp service to hide their pumping notes. On august 9 2021, the sec charged nine individuals, including sharp for their involvement in the fraud. They have also ordered asset freezes in the hopes that some of the alleged ill-gotten gains can be returned to the victims.

The u.s attorney's office of massachusetts has filed parallel criminal charges against four of these individuals, including sharp they're being charged with securities fraud carrying a maximum prison sentence of 20 years. What we've covered today in this video are allegations made by the sec and the department of justice. Of course, the defendants are presumed innocent until proven guilty and are entitled to their day in court. Alright, guys that wraps it up for this video.

What do you think about this alleged billion dollar penny stock scheme? Let us know in the comments section below as always. Thank you so much for watching and we'll see you in the next one wall, street millennial, signing out.