Markets Wired

The Securities and Exchange Commission announced an emergency action charging two individuals with running a pump and dump scheme targeting retail investors. The SEC also obtained an emergency court order freezing the defendants’ assets.

According to the SEC’s complaint, Florida resident Garrett M. O’Rourke and Maryland resident Michael J. Black worked together between 2016 and 2018 to fraudulently sell the stock of several microcap companies to investors, including elderly retail investors, using high pressure stock promotional campaigns. The SEC alleges that, as part of the scheme, O’Rourke aggressively touted the companies to prospective investors through unsolicited cold calls during which he repeatedly lied about his association with legitimate financial institutions and the prospects of the microcap companies. According to the complaint, O’Rourke also told prospective investors that he had their best interests in mind and that he had found promising investment opportunities for them. In actuality, however, O’Rourke was calling them to convince them to buy the stocks so that he and Black could sell their holdings in the same stocks for a profit. O’Rourke and Black also allegedly schemed to disguise their control over at least one of the microcap companies, EnviroTechnologies International, Inc., in order to facilitate their illegal sales of the company’s stock in the public securities market, generating millions of dollars in proceeds.

The SEC’s complaint, filed on July 17, 2019 in U.S. District Court for the Eastern District of New York, charges Black and O’Rourke with violating the antifraud provisions of Section 17(a) of the Securities Act of 1933 (“Securities Act”) and Section 10(b) of the Securities Exchange Act of 1934 (“Exchange Act”) and Rule 10b-5 thereunder and the registration provisions of Section 5(a) and 5(c) of the Securities Act. In addition to the asset freeze and other temporary relief obtained, the SEC is seeking permanent injunctions, return of allegedly ill-gotten gains with prejudgment interest, civil penalties, and penny stock bars.

In a parallel criminal case, the U.S. Attorney’s Office for the Eastern District of New York announced criminal charges against O’Rourke on July 18, 2019.

Investors can find additional information about pump-and-dump scams, including the warning signs of fraud, on Investor.gov.  The Office of Investor Education and Advocacy and Enforcement’s Retail Strategy Task Force have also issued Investor Alerts about these types of fraud, including Investor Alert:  Fraudulent Stock Promotions, Investor Alert: Don’t Invite Investment Scams to Find You, and Investor Alert: Beware of Stock Recommendations on Investment Research Websites.

The SEC’s investigation was conducted by Trevor Donelan, Eric Forni, Kathy Shields, and Amy Gwiazda of the Boston Regional Office, and Rhonda Jung, Melissa Coppola, and Sandeep Satwalekar of the New York Regional Office. The SEC appreciates the assistance of the U.S. Attorney’s Offices for the Eastern District of New York and District of Massachusetts, the Federal Bureau of Investigation, the Royal Canadian Mounted Police, the British Columbia Securities Commission, the Malta Financial Services Authority, the Mauritius Financial Services Commission, the Hong Kong Securities and Futures Commission, the Monetary Authority of Singapore, and the Financial Industry Regulatory Authority.