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SEC Charges Eight Participants in Penny Stock Manipulation Ring


Washington, D.C., May 21, 2009 — The Securities and Exchange Commission has charged eight participants in a penny stock manipulation ring that allegedly pumped the market prices of at least four stocks and generated more than $6.2 million in illicit profits when they dumped shares on the market.

The SEC alleges that Pawel Dynkowski, who resided in Newark, Del., carried out the market manipulation schemes with others he met through a penny stock web site InvestorsHub.com, which is operated by Matthew Brown of Aliso Viejo, Calif. Dynkowski, Brown, and other participants in the schemes often timed the manipulative trading to coincide with false or misleading press releases issued by the companies to hype the stock. The four companies were GH3 International, Inc., Asia Global Holdings, Inc., Playstar Corp., and Xtreme Motorsports of California, Inc.

“As we allege in our complaint, Dynkowski and his accomplices around the country met through the Internet and together spun a web of deception that gave investors the false impression that there was a real demand for these stocks,” said Scott Friestad, Deputy Director of the SEC’s Division of Enforcement. “Dynkowski went so far as to himself write some of the misleading press releases that pumped these penny stocks so they could line their own pockets with millions of dollars.”

The SEC’s complaint, filed in federal district court in Delaware, charges six others in addition to Dynkowski and Brown:

  • Jacob Canceli of Mission Viejo, Calif., who is a stock promoter.
  • Gerard J. D’Amaro of Pompano Beach, Fla., who is a stock promoter.
  • Joseph Mangiapane Jr. of Laguna Niguel, Calif, who was a registered representative at AIS Financial, Inc and is currently CEO of Rubicon Financial, Inc., which owned AIS Financial, Inc. during the relevant time period.
  • Nathan M. Michaud of Boston, Mass., who is a web site designer.
  • Marc J. Riviello of Redwood City, Calif., who was a registered representative at AIS Financial, Inc.
  • Adam S. Rosengard of Voorhees, N.J., who was a student at the University of Delaware during the relevant time period.

According to the SEC’s complaint, these fraudulent schemes generally followed the same pattern. In 2006 and 2007, Dynkowski and his accomplices received large blocks of shares to sell for the penny stock companies, and they received a portion of the proceeds from those sales. The companies put these shares in nominee accounts that Dynkowski and his accomplices controlled. The defendants pumped the market price of the stocks using wash sales, matched orders and other manipulative trading. After artificially inflating the market price of the stocks, Dynkowski and his accomplices then dumped the shares obtained from the issuers and divided the illicit proceeds.

For example, in the scheme involving Asia Global stock, the SEC alleges that Dynkowski personally saw to it that the manipulative trading was coordinated with misleading press releases from the company, and in some instances he wrote the press releases for Asia Global himself. According to the SEC’s complaint, Dynkowski instructed Brown on Aug. 24, 2006, to have Asia Global issue a press release hyping the company’s second quarter 2006 financial results and to “make it sound ENORMOUS.” On September 1, Asia Global issued a press release claiming that its profits for July 2006 were 745 percent greater than its profits for July 2005. Meanwhile, during that same week, Dynkowski and Brown sold 7.75 million shares from nominee accounts, resulting in illicit profits of more than $1.3 million.

Furthermore, according to the SEC’s complaint, Asia Global issued a press release on Feb. 6, 2007, claiming that its subsidiary had just received a license to produce 104 episodes of “Who Wants to Be a Millionaire” in China. The volume of trading in Asia Global increased by more than 65 percent, and Dynkowski and Brown, through orders submitted to Mangiapane and Riviello, were able to sell approximately 5.5 million shares held in nominee accounts, representing approximately 25 percent of the total volume that day. From February 2 through February 8, Dynkowski and Brown, through orders submitted to Mangiapane and Riviello, sold approximately 24.5 million shares held in nominee accounts, making illegal profits of more than $1.2 million.

The SEC’s complaint alleges violations of the antifraud, registration, and other provisions of the federal securities laws. The complaint seeks to have the court permanently enjoin each defendant from future violations, require disgorgement of ill-gotten gains with prejudgment interest, and impose financial penalties. Additionally, the Commission seeks to have certain defendants barred from participating in penny stock offerings.

The U.S. Attorney’s Office for the District of Delaware also today announced felony criminal charges against Dynkowski, Brown, Canceli, D’Amaro, Mangiapane, and Riviello.

The SEC thanks the U.S. Attorney’s Office for the District of Delaware; the Department of Homeland Security, Immigration and Customs Enforcement; the Internal Revenue Service – Criminal Investigations; and the Delaware State Police for their assistance in this matter.

The SEC’s investigation is continuing.

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For more information, contact:

Scott Friestad
Deputy Director, Division of Enforcement
(202) 551-4962

Robert Kaplan
Assistant Director, Division of Enforcement
(202) 551-4969



Modified: 05/21/2009