U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 23495 / March 23, 2016
Securities and Exchange Commission v. Michael Affa, Andrew Affa, Mitchell Brown, Christopher Putnam, and Christopher Nix, Civil Action No. 14-cv-12959 (D. Mass. July 11, 2014)
Judgments Entered Against Five Defendants in Microcap Manipulation Scheme
The Securities and Exchange Commission announced that the federal court in Boston, Massachusetts today entered judgments by consent against Andrew J. Affa, Michael A. Affa, Mitchell H. Brown, Christopher R. Putnam, and Christopher G. Nix in a fraud action that was filed in July 2014. The fraud involved an attempt to manipulate shares of Boston, Massachusetts-based Amogear Inc. that was caught by an FBI undercover operation.
All five defendants were permanently enjoined from violating the securities antifraud statutes and barred from participating in offerings of penny stock.
The Commission's complaint alleged that defendants knew that Amogear was a shell company without any real operations, but schemed from at least August 2012 to February 2014 to boost the price of its securities and profit by selling their own shares. The planned scheme involved artificially inflating the price of Amogear stock by, among other things, a) issuing news releases and/or promotional materials containing false or exaggerated information, b) generating mass emails containing false or exaggerated information, and c) engaging in undisclosed coordinated trading of the stock, all designed to generate the appearance of demand for the stock and to increase the price of the stock. The next stage of the scheme was planned to be the sale of the stock at artificially high prices to unsuspecting investors. What the defendants did not know was that the FBI controlled Amogear and used it to obtain evidence of attempted stock manipulation. On February 10, 2014, the SEC temporarily suspended trading in Amogear's securities as the attempted stock manipulation was underway.
The judgments in the Commission's action permanently enjoin all defendants from violating Section 17(a)(1) and (3) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 (the "Exchange Act") and Rule 10b-5(a) and (c) thereunder. The judgments also prohibit all five defendants from participating in any offering of penny stock, pursuant to Section 21(d)(6) of the Exchange Act.
In a parallel criminal action prosecuted by the Massachusetts U.S. Attorney's Office, all five defendants have entered guilty pleas to one count of conspiracy to commit securities fraud and wire fraud, one count of securities fraud, and five counts of wire fraud. Michael Affa was sentenced on February 12, 2016; the other defendants await sentencing.
For further information, see Litigation Release Nos. 23469 (Feb. 17, 2016) (M. Affa sentencing) and 23041 (July 11, 2014) (complaint).