SEC Charges Pump-and-Dump in Marley Coffee Stock
The Securities and Exchange Commission today announced fraud charges against several alleged perpetrators behind a $78 million pump-and-dump scheme involving the stock of Jammin’ Java, a company that operates as Marley Coffee and uses trademarks of late reggae artist Bob Marley to sell coffee products.
The SEC alleges that Jammin Java’s former CEO Shane Whittle orchestrated the scheme with three others who live abroad and operate entities offshore. Whittle utilized a reverse merger to secretly gain control of millions of Jammin Java shares, and he spread the stock to the offshore entities controlled by Wayne Weaver of the UK and Canada, Michael Sun of India, and René Berlinger of Switzerland. The shares were later dumped on the unsuspecting public after the stock price soared following fraudulent promotional campaigns.
Charged with fraudulently promoting Jammin’ Java stock to investors are British twin brothers Alexander Hunter and Thomas Hunter, who were previously charged in a separate SEC case for touting multiple penny stocks using a fake stock picking robot. Others charged in the SEC’s complaint with facilitating the illegal offering through their offshore entities are UK citizens Stephen Wheatley and Kevin Miller and Oman resident Mohammed Al-Barwani.
“As alleged in our complaint, the defendants made millions of dollars in illicit profits at the expense of the investing public and attempted to conceal their misconduct through complex offshore networks that were revealed in our investigation,” said David Glockner, Director of the SEC’s Chicago Regional Office.
According to the SEC’s complaint filed in U.S. District Court for the Central District of California:
- Whittle, a stock promoter, befriended the son of Bob Marley in Los Angeles. After learning of Marley’s purchase of a small Jamaican coffee farm, Whittle proposed the creation of a large-scale coffee distribution business built on the Marley name.
- To raise capital for the Marley venture, Whittle identified publicly-traded shell company Global Electronic Recovery Corp. (GERC), which was a purported waste management business in Los Angeles. He executed a reverse merger between GERC and Marley Coffee, which later became Jammin’ Java and trades under the ticker symbol JAMN.
- In connection with the reverse merger, Whittle secretly gained control of millions of shares that previously had been issued to foreign nominees.
- Using his access and control of Jammin’ Java and its stock, Whittle and others coordinated an illegal offering and the fraudulent promotion of Jammin’ Java’s stock in a pump-and-dump scheme that culminated in the middle of 2011.
- In anticipation of the promotion, Whittle distributed some of the nominee stock to offshore entities controlled by Weaver, Sun, and Berlinger.
- To boost the stock price and provide cash to Jammin’ Java, Whittle, Weaver, Sun, and Berlinger orchestrated a sham financing arrangement designed to create the false appearance of legitimate third-party interest and investment in the company.
- Jammin’ Java’s announcement of the financing agreement and other company announcements – together with coordinated trading by entities connected to the scheme – caused the stock price to rise.
- To conceal his control of the stock and other aspects of the scheme, Whittle made material misstatements and misleading omissions in beneficial ownership reports filed with the SEC.
- Whittle distributed another large block of stock to offshore entities, including those controlled or owned by Weaver, Sun, Berlinger, Wheatley, Miller, and Al-Barwani. To conceal their interest, Whittle, Weaver, Sun, and Berlinger failed to disclose their beneficial ownership of Jammin’ Java stock.
- The Hunters published false stock newsletters and took other steps to hype the stock and send the share price sharply upward.
- With Jammin’ Java’s stock value artificially inflated, the defendants and others coordinating with them dumped 45 million shares on the public market without registering the transactions, making at least $78 million in illicit profits in the process.
- Weaver, Sun, and Berlinger funneled $2.5 million in profits to Jammin’ Java under the guise of the sham financing arrangement that launched the promotion.
- Jammin’ Java’s share price and volume began to collapse a few days after the company disclosed on May 9, 2011, that it became aware of an unauthorized and unaffiliated online stock promotion. The stock fell further after the company released disappointing financial results in its annual report.
The SEC’s complaint charges Jammin’ Java, Whittle, Weaver, Sun, Berlinger, Wheatley, Miller, and Al-Barwani with conducting an illegal offering in violation of Sections 5(a) and 5(c) of the Securities Act of 1933. The complaint further alleges that Whittle, Weaver, Sun, Berlinger, and the Hunters violated Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5, and Whittle, Weaver, Sun, and Berlinger violated Section 13(d) of the Exchange Act and Rules 13d-1 and 13d-2. Whittle is additionally charged with violating Section 16(a) of the Exchange Act and Rule 16a-3, and the Hunters are charged with violations of Sections 17(b) of the Securities Act, which prohibits fraudulent touting of stock.
The SEC is seeking injunctions, disgorgement, prejudgment interest, and penalties as well as penny stock bars against all of the individuals and an officer-and-director bar against Whittle.
The SEC’s investigation was conducted by Kathryn A. Pyszka and Paul M. G. Helms in the Chicago office, and the litigation will be led by John E. Birkenheier and Timothy S. Leiman. The SEC appreciates the assistance of the Financial Industry Regulatory Authority, the British Columbia Securities Commission, the Capital Markets Board of Turkey, the Cayman Islands Monetary Authority, the Jersey Financial Services Commission, the Mexican Comisión Nacional Bancaria y de Valores, the Ontario Securities Commission, the Republic of the Marshall Islands Banking Commission, the Swiss Financial Market Supervisory Authority, and the United Kingdom Financial Conduct Authority.