Among recent enforcement actions by the Securities and Exchange Commission were charges against a microcap oil company, its CEO and the author of a stock newsletter for defrauding investors; charges and an emergency asset freeze for a China-based trader for suspicious activity; and charges against a microcap promoter for illegal penny stock sales.
CEO of Microcap Oil Company Bilked Investors Through Spam, SEC Says
The SEC has charged Norstra Energy and its CEO, Glen Landry, with defrauding investors about reserve estimates and drilling plans, and Eric Dany, author of a stock-picking newsletter, for his part in a fraudulent promotional campaign pushing Norstra’s penny stock shares.
According to the agency, Landry began making false and misleading claims about business prospects on Norstra’s website as well as in press releases and SEC filings. Landry and Norstra Energy led investors to believe the company’s property was in a location that made wells look more promising, and also twice gave wrong dates for drilling to start, so that it would look as if oil would be struck quickly.
For his part, Dany’s promotional materials, sent via spam emails and a hard-copy mailer, claimed that “Norstra Energy could be sitting on top of as much as 8.5 billion barrels of oil!” and said the planned wells had a 99% chance of profitability. The combination of lies about property location and the prospects for prosperity made Norstra Energy’s stock price rise almost 600% over a three-month period. The SEC suspended trading in the stock in June 2013.
The SEC seeks final judgments ordering permanent injunctions, return of allegedly ill-gotten gains with interest, and financial penalties, as well as a bar on Landry serving as an officer or director of a public company or participating in a penny stock offering.
China-Based Trader Made $1 Million a Little Too Quickly, SEC Says
The SEC has gotten an emergency court order to freeze the assets of Haijian Luo of Guangzhou, China, after he made more than $1 million after trading in a U.S. brokerage account in advance of last week’s public announcement that China-based Qihoo 360 Technology Co. Ltd. had received a buyout offer at a significant premium from its CEO and a consortium of other affiliates.
According to the agency, Luo, who is head of a Chinese online gaming company, recently opened a brokerage account and had not previously used it to trade in Qihoo’s stock before betting that Qihoo’s stock price would rise in the short term. He bought about $700,000 of out-of-the-money call options before the buyout announcement, and once the stock price jumped, sold all the options and requested his brokerage firm to wire more than half of his $1 million proceeds to a foreign bank account.