U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 23039 / July 8, 2014
Securities and Exchange Commission v. John Babikian, Civil Action No. 14-CV-1740 (S.D.N.Y.)
Court Enters Final Judgment Against Promoter in Settlement of Microcap Stock Scalping Case and Orders $3.73 Million in Sanctions
The Securities and Exchange Commission announced today that the Honorable Paul A. Crotty of the United States District Court for the Southern District of New York entered a final judgment on July 8, 2014, against defendant John Babikian in the Commission action styled, SEC v. John Babikian, Civil Action No. 14-CV-1740 (S.D.N.Y.). The Court entered the final judgment, to which Babikian consented without admitting or denying the allegations in the Commission's Complaint. The final judgment orders Babikian to pay a total of $3,730,000, comprised of $1,915,670 in disgorgement, together with prejudgment interest in the amount of $128,073, and a civil penalty in the amount of $1,686,257. The final judgment also imposes a bar from participating in any offering of penny stock and enjoins Babikian from recommending, directly or indirectly, the purchase of any U.S. publicly traded or quoted stock without simultaneously disclosing any plans or intentions to sell such stock within 14 days of the recommendation. Finally, the final judgment permanently enjoins Babikian from violating Section 17(a) of the Securities Act of 1933 (15 U.S.C. § 77q(a)), Section 10(b) of the Securities Exchange Act of 1934 (15 U.S.C. § 78j(b)) and Rule 10b-5 promulgated thereunder (17 C.F.R. § 240.10b-5).
The Commission's complaint, filed on March 13, 2014, alleged that Babikian used AwesomePennyStocks.com and its related site PennyStocksUniverse.com, collectively "APS," to commit a brand of securities fraud known as "scalping." The APS websites disseminated e-mails to approximately 700,000 people shortly after 2:30 p.m. Eastern time on the afternoon of Feb. 23, 2012, and recommended the penny stock America West Resources Inc. (AWSRQ). What the e-mails failed to disclose among other things was that Babikian held more than 1.4 million shares of America West stock, which he had already positioned and intended to sell immediately through a Swiss bank. The APS emails immediately triggered massive increases in America West's share price and trading volume, which Babikian exploited by unloading shares of America West's stock over the remaining 90 minutes of the trading day for ill-gotten gains of more than $1.9 million.
The Commission wishes to acknowledge the assistance of the Quebec Autorité des Marchés Financiers and the Financial Industry Regulatory Authority.
See also Litigation Rel. No. 22944 (March 14, 2014).