SEC Charges 8 Participants in Penny Stock Manipulation Ring

FOR IMMEDIATE RELEASE 2009-117

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.

# # #

For more information, contact:

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

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

Source: http://www.sec.gov/news/press/2009/2009-117.htm

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SEC v. Pawel P. Dynkowski, Matthew W. Brown, Jacob Canceli, Gerard J. D’Amaro, Joseph Mangiapane Jr., Nathan M. Michaud, Marc J. Riviello and Adam S. Rosengard, Civil Action No. 09-361 (D. Del.) (May 20, 2009)

Litigation Release No. 21053 / May 21, 2009

SEC Charges Eight Participants in Penny Stock Manipulation Ring

The Securities and Exchange Commission (“Commission”) announced today that it filed a complaint in the United States District Court for the District of Delaware against Pawel P. Dynkowski, Matthew W. Brown, Jacob Canceli, Gerard J. D’Amaro, Joseph Mangiapane Jr., Nathan M. Michaud, Marc J. Riviello and Adam S. Rosengard. The complaint alleges that in 2006 and 2007, Dynkowski, a Polish citizen who resided in the U.S., engaged in market manipulation schemes with at least four separate stocks: GH3 International, Inc., Asia Global Holdings, Inc., Playstar Corp., and Xtreme Motorsports of California, Inc. As alleged in the complaint, Dynkowski’s co-defendants each participated in one or more of these schemes, which together generated more than $6.2 million in illicit profits .

The SEC’s complaint alleges that these fraudulent schemes generally followed the same pattern: Dynkowski and his accomplices agreed to sell large blocks of shares for penny stock companies in exchange for a portion of the proceeds. 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, often timed to coincide with false or touting press releases by the companies, to give the market the false impression that there was real demand for these stocks. 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.

The SEC’s complaint further alleges that:

• The pump-and-dump scheme involving GH3 International, Inc. stock occurred between October and December 2006. Dynkowski orchestrated this fraud with Matthew W. Brown, who operates a penny stock website called InvestorsHub.com. Brown introduced Dynkowski to a representative of GH3 and to Jacob Canceli, a penny stock promoter who participated in the scheme. Brown acted as a liaison between Dynkowski, Canceli and the issuer. Dynkowski and his associates used wash sales, matched orders, and other manipulative trading, timed to coincide with false, misleading and touting press releases by the company, to inflate the price of GH3 stock. Canceli provided the accounts from which Dynkowski subsequently sold purportedly unrestricted shares received from the issuer. The scheme culminated in mid-December 2006, with Dynkowski dumping 312 million shares of GH3 stock for total illicit proceeds of $747,609.


• Brown planned the Asia Global pump-and-dump scheme with Joseph Mangiapane Jr. and Marc J. Riviello, who were both registered representatives at a small broker-dealer in California. Dynkowski and Nathan M. Michaud, who met through InvestorsHub.com, pumped the price of Asia Global stock using wash sales, matched orders and other manipulative trading, coordinated with false, misleading, and touting press releases by the company. The scheme occurred in three cycles: August-September 2006, November-December 2006, and January-February 2007. After manipulating the price of stock, Dynkowski, Brown, Mangiapane and Riviello dumped more than 54 million shares that had been improperly registered on SEC Form S-8 and held in nominee accounts. The illicit proceeds from this scheme totaled at least $4,050,529.


• Dynkowski and Gerard J. D’Amaro carried out the Playstar pump-and-dump scheme. The two of them met through InvestorsHub.com. D’Amaro acted as the liaison with the issuer as well as the nominee account holder for the purportedly unrestricted shares received from the company. In this scheme, which occurred during October and November 2006, Dynkowski pumped Playstar’s stock through wash sales, matched orders and other manipulative trading. Dynkowski and D’Amaro sold 11.5 million shares for total illicit proceeds of $1,180,294.


• Dynkowski and an accomplice carried out the Xtreme Motorsports pump-and-dump scheme. The two of them, who met through InvestorsHub.com, pumped Xtreme Motorsports stock through wash sales, matched orders and other manipulative trading during January and February 2007. Dynkowski’s friend, Adam S. Rosengard, served as the nominee account holder who facilitated the dump of 13 million purportedly unrestricted shares of Xtreme Motorsports stock. After pumping the stock, Dynkowski sold the shares from Rosengard’s account generating illicit proceeds of $257,646.

The SEC’s complaint alleges that Dynkowski and Brown violated Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933 (“Securities Act”), Sections 10(b) and 13(d) of the Securities Exchange Act of 1934 (“Exchange Act”), and Rules 10b-5, 13d-1 and 13d-2 thereunder; that Canceli, D’Amaro, Mangiapane, and Riviello violated Sections 5(a), 5(c), and 17(a) of the Securities Act, Section 10(b) of the Exchange Act, and Rule 10b-5; that Michaud violated Section 17(a) of the Securities Act, Section 10(b) of the Exchange Act, and Rule 10b-5; and that Rosengard violated Sections 5(a) and 5(c) of the Securities Act.  The complaint seeks against each defendant a permanent injunction against future violations, disgorgement of ill-gotten gains with prejudgment interest, and civil monetary penalties, and, as to certain defendants, orders barring them from participating in penny stock offerings.

The U.S. Attorney’s Office for the District of Delaware also announced today 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.

SEC Complaint in this matter

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SEC Accuses Matthew Brown from ADVFN's Investor Hub of Penny Stock Manipulation

By Perry H. Rod, Published: May 25th, 2009 4:22 PM EDT

Forget about illegal naked short selling and other hedge fund profiteering schemes that may have brought down the world economy.  The United States Securities and Exchange Commission has more important matters occupying its attention.

In a complaint filed in Delaware by the SEC, InvestorsHub.com founder and operator Matthew Brown and seven others were accused of a pump-and-dump scheme in 2006 involving GH3 International, Inc. and Asia Global, in two separate incidents.  Brown is accused of being a "liaison" between the accused in the GH3 incident, where the participants "used wash sales, matched orders, and other manipulative trading, timed to coincide with false, misleading and touting press releases by the company, to inflate the price of GH3 stock."  The group is suspected to have made off with $747,609 from the GH3 trades.

In a separate incident, Brown orchestrated a pump-and-dump scheme with broker-dealers in California who "met through InvestorsHub.com, pumped the price of Asia Global stock using wash sales, matched orders and other manipulative trading, coordinated with false, misleading, and touting press releases by the company."

The complaint alleges that "the illicit proceeds from this scheme totaled at least $4,050,529."

InvestorsHub.Com, Inc. is a wholly-owned subsidiary of ADVFN, which trades on the London Stock Exchange as AFN. InvestorsHub.Com operates both Investors Hub and Silicon Investor, according to its website.  ADVFN, according to its annual report, receives over 10 million dollars in revenues per year.  Matthew Brown is not on the parent company's board of directors or a part of their executive management.  He is listed as the Lead Site Administrator for Investors Hub and has posted 24,285 messages on the board, according to the website.

Source : http://www.marketrap.com/article/view_article...nipulation