U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 21204 / September 11, 2009
Securities and Exchange Commission v. Daryl O. Anderson, Civ. Action No. 2:09-CV-1799 (United States District Court for the District of Nevada)
SEC Files Fraud Charges Against Former Stockbroker for Conducting Scalping Scheme
The Securities and Exchange Commission yesterday filed a civil action against Daryl O. Anderson, 41, a resident of Henderson, Nevada and former registered securities sales representative, for conducting a stock scalping scheme generating over $930,000 in illicit profits.
Scalping is the illegal practice of recommending that others purchase a security, while secretly selling the same security, contrary to the recommendation.
The Commission's complaint alleges that between June 2007 and January 2008, Anderson, who was no longer associated with a registered broker-dealer, recommended Pink Sheets-quoted Cloudtech stock to his former brokerage customers, friends, and relatives (collectively, "investors"). Anderson pitched Cloudtech to investors as an up-and-coming company where they could double or triple their money quickly.
According to the complaint, Anderson's investors trusted and followed his advice, purchasing over one million Cloudtech shares at a cost in excess of $3 million. Those purchases accounted for 33% of the total trading volume in the stock, and triggered a 358% increase in the stock price (from $0.95 per share to a high of $4.35 per share).
The complaint further alleges that while Anderson was recommending Cloudtech stock to investors, contrary to his buy recommendations, he was secretly selling his personal Cloudtech shares, thereby realizing $930,852 in illicit profits from his stock scalping scheme.
Anderson has consented to a permanent injunction against future violations of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, without admitting or denying the Commission's allegations. Anderson also agreed to pay disgorgement of his ill-gotten gains, prejudgment interest, and a civil penalty, in amounts to be determined by the court.