U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 20899 / February 12, 2009
SEC v. George Georgiou, Civil Action No. 09-CV-616 (MMB) (E.D. Pa.)
SEC CHARGES GEORGE GEORGIOU, A CANADIAN CITIZEN, FOR MARKET MANIPULATION SCHEMES
The Securities and Exchange Commission announced that today it charged George Georgiou, of Toronto, Ontario, with manipulating the market in four separate microcap stocks — Avicena Group, Inc., Neutron Enterprises, Inc., Hydrogen Hybrid Technologies, Inc., and Northern Ethanol, Inc.
The Commission's action, filed in federal district court in Philadelphia, alleges that, from 2004 through September 2008, Georgiou, who controlled the publicly-traded stock of each company, manipulated the market for the purpose of artificially inflating each company's stock price or to create the false appearance of an active and liquid market. In order to do so, Georgiou used many nominee accounts that he either directly or indirectly controlled at offshore broker-dealers and banks, and used a variety of manipulative techniques, including matched orders and wash sales. Ultimately, Georgiou realized at least $20.9 million in ill-gotten gains from his manipulation schemes.
In addition to the enforcement action, the Commission today entered an order suspending trading in the securities of the four manipulated stocks for a ten day period commencing 9:30 a.m. February 12, 2009. The U. S. Attorney for the Eastern District of Pennsylvania today separately announced criminal charges against Georgiou involving the same conduct.
The Commission's complaint alleges that Avicena Group is headquartered in Palo Alto, California, and that the other three companies are headquartered in Canada. Each of the manipulation schemes followed a similar pattern. Georgiou controlled all or a large percentage of the unrestricted, publicly-traded stock of each company. He had influence with management, access to confidential shareholder lists, and was able to coordinate the release of company news with his illegal trading. In recorded conversations and through his own e-mails, Georgiou admitted his intent to manipulate each of the stocks, and gave directions to his nominees.
The complaint further alleges that Georgiou used many nominee accounts at offshore broker-dealers in Canada, the Bahamas, Turks and Caicos, and other locations. Georgiou asserted direct control over some accounts by issuing trading and wiring instructions directly to broker-dealers, and indirect control over others by communicating trading instructions to nominees who, in turn, executed Georgiou's trading instructions. Through these accounts, Georgiou used a variety of manipulative techniques in each scheme, including controlling the trading volume through promises of profits to nominees, executing or directing matched orders, wash sales, or other prearranged trades, marking-the-close, and paying illegal kickbacks in exchange for purchases.
The complaint alleges that Georgiou's manipulation of Hydrogen Hybrid Technologies was in the nature of a pump and dump scheme, in which Georgiou arranged and paid for the publication of a promotional mailer sent to seven million addresses across the U.S. Georgiou coordinated manipulative trading with the publication of the mailer, and ultimately received more than $3.8 million when he dumped his shares into the artificially inflated market. The complaint also alleges that part of Georgiou's manipulation of Northern Ethanol stock involved the payment of an illegal kickback to a person Georgiou believed was a corrupt registered representative, but who was in reality an undercover FBI agent.
The complaint alleges that Georgiou also defrauded two offshore broker-dealers by obtaining margin loans, using the manipulated stocks as collateral, that further funded his manipulations and allowed him to withdraw cash that he wired to offshore bank accounts. Georgiou's total ill-gotten gains from his stock purchases in, and cash withdrawals from, the fraudulently obtained margin accounts was at least $17.1 million.
The complaint alleges violations of Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The complaint seeks a permanent injunction, disgorgement of ill-gotten gains, together with prejudgment interest, civil penalties, and a penny stock bar against Georgiou.
The Commission acknowledges and appreciates the assistance of the U.S. Attorney's Office for the Eastern District of Pennsylvania and the Federal Bureau of Investigation in connection with this matter.