SEC files scalping suit against the "Monk" 20

SEC files scalping suit against the "Monk"

2012-07-24 13:44 ET - Street Wire

Also Street Wire (U-*SEC) U.S. Securities and Exchange Commission
Also Street Wire (U-CDIV) Cascadia Investments Inc
Also Street Wire (U-GRNO) Green Oasis Environmental Inc

by Mike Caswell

The U.S. Securities and Exchange Commission has filed a scalping case against Arizona promoter Jerry Williams, also known as the "Monk," for dumping millions of shares in two pink sheets listings as he was convincing investors to buy those same companies. The SEC claims that he persuaded large numbers of investors to buy the stocks as part of a trading strategy he called "Float Lock Down." His efforts pushed one stock to 73 cents from under a penny, which the SEC says allowed him to dump millions of his own shares. (All figures are in U.S. dollars.)

The two promotions that the SEC complains of were for Green Oasis Environmental Inc., which has an address in Edmonton, Alta., and Cascadia Investments Inc., which lists its address in Tacoma, Wash. The SEC suspended Cascadia in June, 2011, citing questions about the accuracy of information about the company.

The charges against Mr. Williams, 45, are contained a civil fraud complaint that the SEC filed in the District of Connecticut on Friday, July 20. According to the complaint, he ran an Internet message forum called the "Monk's Den" and held investment seminars around the world at which he promoted a trading strategy called "Float Lock Down" (also known as a short squeeze). The idea behind the strategy was that a group of investors would buy all the shares of a heavily shorted company, forcing short-sellers to cover at a substantial loss. This would cause the stock to rise and result in substantial profits for shareholders, he told subscribers.

The SEC says that his strategy developed a considerable following. At first he only promoted the idea on-line, through his Monk's Den forum. He then started touring the country, holding seminars where investors paid between $1,000 and $1,500 per person to attend. The seminars, called "Monkinars," took place in 18 cities in the U.S., as well as in Japan, Germany and Barbados. Mr. Williams posted pictures of the conferences on his message board, including one at which attendees wore shirts with the logo "Lock the Float."

As the seminars went on, Mr. Williams's popularity grew considerably, the SEC says. His forum drew 16,392 messages in January, 2010, growing to 38,310 messages by March, 2010. His following grew so much that he hired three employees to administer his forum and organize the seminars.

The actual scalping, as described by the SEC, took place after March, 2009, when Cascadia hired Mr. Williams to promote the company. Without disclosing that the company had hired him, Mr. Williams told subscribers to buy Cascadia as part of his trading strategy. He falsely told them that the company had a $3-million real estate portfolio when filings showed an $11,000 value, the SEC claims.

As Cascadia started rising (going to 13 cents on Feb. 5, 2010), Mr. Williams encouraged investors to keep holding the stock, telling them it would be "counterproductive to sell when we are trying to lock up the float." According to the SEC, he failed to tell them that he had personally sold 15 million shares to that point, all of which the company had issued to him as a promotional fee.

Despite his sales, the stock continued to rise, reaching a 72-cent high in March, 2010, before gradually declining to two cents. In total, Mr. Williams unloaded 24 million Cascadia shares, making $2-million, the complaint states.

The SEC claims that he carried out a similar scheme with Green Oasis, which hired him as a promoter in February, 2010. He first listed the company as a "Float Lock Down" target on Feb. 26, 2010, the day after he received 650,000 Green Oasis shares as part of his promoting fee. That same day the stock doubled, going to 19 cents. Mr. Williams immediately unloaded 450,000 shares, making $61,250, according to the complaint.

Mr. Williams received another 800,000 Green Oasis shares on March 10, 2010, which the SEC says he also sold. The day he received the stock, he sent an e-mail alert encouraging investors to buy the company. Before the end of the month, he had sold an additional 360,000 shares at prices from 29 cents to 45 cents, the complaint states. In all, Mr. Williams sold 1.38 million Green Oasis shares, making $375,000, according to the SEC.

In addition to accusing Mr. Williams of scalping, the SEC questions his credentials. In his seminars, he claimed that he had a PhD in structural engineering from several universities. In reality, he had purchased a PhD certificate from an unaccredited on-line institution, the SEC claims.

The complaint seeks an injunction barring Mr. Williams from securities violations, disgorgement of ill-gotten gains and an appropriate civil penalty. The SEC is also asking for a permanent penny stock ban.

In addition to Mr. Williams, the defendants are Monk's Den LLC and First In Awareness LLC, two private entities that he controls.