U.S. Securities and Exchange Commission
Litigation Release No. 21833 / February 1, 2011
Securities and Exchange Commission v. Gregg M.S. Berger, et al., Case No., 2:11-CV-10403 (RHC-PJK) (E.D. Mich.)
SEC CHARGES EIGHT INDIVIDUALS AND THREE COMPANIES IN $33 MILLION INTERNATIONAL MICROCAP FRAUD
The Securities and Exchange Commission today filed fraud charges against the operators of a $33 million international microcap stock scheme involving the stocks of eight small U.S. companies headquartered in the People's Republic of China, Canada, and Israel.
In a complaint filed in U.S. District Court for the Eastern District of Michigan, the SEC charged three companies and eight individuals with engaging in unlawful spam e-mail campaigns to pump and dump securities of microcap companies. The SEC alleges that each scheme was primarily organized and devised by one or all of the following:
In a parallel criminal proceeding, the Department of Justice today unsealed an indictment against Berger, charging him with one count of conspiracy to commit securities fraud and wire fraud. Previously, in related criminal actions, Hui and Tribble pleaded guilty to conspiracy to commit wire fraud, mail fraud and to violate the CAN-SPAM Act, as well as to committing wire fraud and engaging in money laundering for their roles in the scheme to artificially inflate the prices of the securities of several companies, including China World Trade. Hui and Tribble were each sentenced to 51 months in prison for their actions.
The SEC also charged the following corporate insiders for their participation in the pump-and-dump schemes and for engaging in a fraudulent scheme to conceal the sales of millions of shares of their companies' securities:
The three companies charged are China Digital, Global Peopleline, and m-Wise.
The SEC alleges that at various times between January 2005 and December 2007, each of the defendants engaged in one or more schemes to pump up the price and volume of the securities of one or more of the companies by paying for false spam e-mail campaigns.
According to the SEC's complaint, the false spam e-mails lured investors into the market and drove up demand in the stocks by, among other things, touting non-existent IPOs and acquisitions, presenting an unrealistic picture of the companies' business prospects, providing baseless share price projections, or including false disclaimers. The defendants then dumped millions of shares of these securities into the hyped market through nominee brokerage accounts they opened with Berger, reaping millions of dollars in profits. All eight companies' stocks were dually quoted on the Over-the-Counter Bulletin Board and Pink Sheets.
The SEC's complaint alleges that Tribble masterminded the pump-and-dump schemes with respect to five of the companies, and arranged for the spam e-mail campaigns for two other companies. Berger, a long-time friend of Tribble, played a central role in the schemes by arranging for the pump and dump of m-Wise and facilitating the sales of millions of shares in all eight companies through nominee brokerage accounts. John Hui and Bernard Chan also played key roles in the fraudulent schemes by finding U.S. public shell companies to use in bringing private Chinese companies public through reverse mergers. They arranged for the deposit and sale of stock through nominee brokerage accounts, and coordinated the transfer of the unlawful trading proceeds to pay for the spam e-mail campaigns among other things.
The SEC seeks permanent injunctions, disgorgement and financial penalties against Berger and Chan for violations of the antifraud and registration provisions, and against Angela Du and Global Peopleline for violations of the antifraud, registration, and reporting provisions of the federal securities laws. The Commission also seeks an officer and director bar against Du, and penny stock bars against Berger, Chan, and Du.
Without admitting or denying the SEC's allegations, Tribble, John Hui, Daniel Ng, Ben-Asulin, Broudo, m-Wise, and China Digital have agreed to settle the charges against them. The settlements are pending final approval by the court.
The SEC acknowledges and appreciates the assistance of the U.S. Attorney's Office for the Eastern District of Michigan, the Department of Justice, Computer Crime and Intellectual Property Section, the Hong Kong Securities and Futures Commission, and the Cyprus Securities and Exchange Commission.
The SEC's investigation is continuing.