Bulgarian resident accused in bogus bid
NEW YORK • A hoax that whipsawed shares of Avon Products Inc. last month became a little less murky as the U.S. Securities and Exchange Commission claimed a resident of Bulgaria was behind the fake takeover bid for the iconic American company — along with two other bogus tender offers dating to 2012.
Avon shares surged as much as 20 per cent on May 14 after a regulatory filing purported to show a bid of US$18.75 a share — about three times Avon’s stock price at the time. Avon said there was no such offer.
Nedko Nedev, 37, who lives in Sofia, took positions in Avon, Tower Group International Ltd. and Rocky Mountain Chocolate Factory Inc. just before sham entities — including PTG Capital Partners Ltd. — filed fake news releases announcing takeover bids through the SEC’s EDGAR public filing system, the agency said in a lawsuit Thursday. The Avon release contained typos, extra spaces and even two different names of the supposed private equity firm.
It is “highly unlikely’’ that Nedev’s trading was “mere coincidence,” the agency said in its complaint in Manhattan federal court. “There is no indication that PTG Capital is a legitimate company organized for any other reason than the stock manipulation.”
Sen. Charles Grassley, an Iowa Republican who chairs the Senate Judiciary Committee, last week expressed concern to the SEC about the “relative ease” of making fake Edgar filings. On Thursday, he called it “reassuring” that the SEC may have found an Avon fraudster but remained concerned that “systemic problems” could cause a recurrence.
“Catching someone after the fact means the damage to the markets already has been done,” Grassley said.
In its complaint, the SEC describes a more sophisticated scam than many at first suspected.
On May 14, PTG Capital filed a dummy release claiming to have made a tender offer for Avon, and volume in the beauty products company spiked 448 per cent in one day, the SEC said.
PTG, which “to the extent it actually exists” operates out of Sofia, had gained access to the EDGAR system around April 21, the SEC said.
Almost exactly a year earlier, on May 13, 2014, an entity called Euroins Insurance Group issued a bogus release claiming it had offered to buy Tower Group, sending shares surging 32 per cent, the agency said.
And on Dec. 28, 2012, a firm calling itself PST Capital announced what turned out to be a makebelieve offer for Rocky Mountain Chocolate, and its shares jumped 23 per cent after the close of trading, the SEC said.
Nedev was behind them all, the SEC claimed. He earned US$23,368 on the Tower Group “offer,” the agency said.
Nedev “or others working with him attempted to manipulate the equity price” by issuing “fraudulent tender offers or (news) releases,” according to the complaint.