What You Need to Know
- An Ohio over-the-counter penny stock trader allegedly ran a pump-and-dump scheme that earned him $1 million in illegal proceeds.
- The defendant was arrested and faces a maximum of 85 years in prison if found guilty on all four charges.
- The SEC filed an emergency action and obtained an injunction and asset freeze against him.
A stock trader based in Maumee, Ohio, was arrested on Tuesday and charged with securities fraud, wire fraud and market manipulation after he used his Twitter account to operate a pump-and-dump scheme involving over-the-counter penny stocks, according to Damian Williams, U.S. attorney for the Southern District of New York.
Steven Gallagher, 50, was arrested in the Northern District of Ohio but was charged in a complaint filed in U.S. District Court for the Southern District of New York, Williams said in a news release that described the defendant as an “active day trader.”
The defendant faces a maximum of 85 years in prison if found guilty on all four charges. He was charged with two counts of securities fraud, one of which carries a maximum sentence of 20 years in prison and the other that carries a maximum sentence of 25 years, and one count each of wire fraud and market manipulation, which each carry a maximum of 20 years, according to the Justice Department.
Gallagher, using the aliases “Alex Delarge” and “@AlexDelarge6553,” created a stock promotion account on Twitter in September 2019 that attracted more than 70,000 followers and earned him over $1 million in illegal proceeds, according to the complaint.
His alias was a nod to the main character of the Anthony Burgess novel “A Clockwork Orange” and the classic Stanley Kubrick film of the same name in which actor Malcolm McDowell played him.
Gallagher used the Twitter account to tout certain over-the-counter penny stocks and to disseminate false and misleading information about his trading in those stocks to induce his followers to buy those stocks and drive up their prices, the complaint alleged.
From at least in or about May 2020, up to and including in or about the present, in the Southern District of New York and elsewhere, Gallagher “willfully and knowingly” devised and ran the scheme to defraud investors, the complaint alleged.