On­tario OTC-BB scheme draws U.S. fraud charges

SEC files case over Ecoland In­ter­na­tional

Stockwatch Daily - - FRONT PAGE - By Mike Caswell

THE U.S. Se­cu­ri­ties and Ex­change Com­mis­sion has filed civil fraud charges over the ma­nip­u­la­tion of an On­tario OTC Bul­letin Board com­pany, Ecoland In­ter­na­tional Inc., that went to $1.24 from 11.2 cents in a 10-day span. (All fig­ures are in U.S. dol­lars.) The reg­u­la­tor claims that a group of men boosted the stock with mis­lead­ing spam and matched trades. At the same time they dumped $3.29-mil­lion worth of shares, ac­cord­ing to the SEC.

The al­le­ga­tions are con­tained in a civil com­plaint filed on Sept. 29, 2016, in the Eastern District of Penn­sylva-

nia. The de­fen­dants in­clude Mississauga res­i­dent Bernardino “Dino” Paolucci Jr., 38, who is listed as the op­er­a­tor of a group of tout­ing web­sites. These in­clude pen­ny­play­er­sclub.com, in­sanepen­nies.com and mar­ket­bulls.com.

The scheme, as de­scribed by the SEC, took place in 2011 and early 2012. Ac­cord­ing to the com­plaint, in July, 2011, Mr. Paolucci ar­ranged for a pri­vate auto parts com­pany that he con­trolled to go pub­lic on the OTC Bul­letin Board through a merger. The deal was struc­tured in a way that gave him and his as­so­ciates con­trol over more than 90 per cent of the stock of the re­sult­ing com­pany, the SEC claims.

To gen­er­ate in­ter­est in the largely dor­mant com­pany, the men ar­ranged a pro­mo­tional cam­paign that in­cluded spam and news re­leases that Mr. Paolucci drafted, the SEC says. The spam, as quoted in the com­plaint, con­tained the non­sense typ­i­cally found in such mes­sages. Among other things, it stated: “ECIT is our next WIN­NER and you do not want to miss out. There is no doubt about it, this stock is headed for the moon.” The mes­sages also bragged that “pre­vi­ous rec­om­men­da­tion let­ters have turned $5,000 into $50,000 in less than 1 month!”

What the spam did not dis­close, ac­cord­ing to the SEC, was that the men re­spon­si­ble for the mes­sages also had con­trol over nearly all of Ecoland’s stock. It also did not say that they were busy sell­ing into the in­ter­est they were creat­ing, the SEC claims. In­stead the spam falsely stated that the pro­moter re­ceived only a fixed fee (such as $100,000).

Mean­while Ecoland’s vol­umes were ris­ing sub­stan­tially. Dur­ing a par­tic­u­larly busy four-week pro­mo­tional pe­riod in early 2012 the com­pany traded an av­er­age of 3.6 mil­lion shares a day, up from 51,694 in the prior four-week pe­riod, the com­plaint states. The stock also reached its peak dur­ing that pe­riod, hit­ting $1.24. (Within three months it fell to 13 cents.)

Aid­ing the spam was a se­ries of matched trades the men ar­ranged, the SEC claims. Those trades, as de­scribed by the SEC, took place be­tween at least 12 out­side in­di­vid­u­als that the men had hired. On many days their ac­tiv­ity ac­counted for most of the com­pany’s vol­ume, ac­cord­ing to the com­plaint.

Over a five-month pe­riod, the men gen­er­ated at least $3.29-mil­lion sell­ing Ecoland shares, the SEC claims. The bulk of this money, $2.05-mil­lion, went to Mr. Paolucci, the SEC says. The re­main­der was split amongst his co-de­fen­dants.

The com­plaint names the oth­ers as Don Rose, 59, of New York; Frank Morelli, 60, of Colorado; Jeremy Draper, 39, of New York; and Louis Buono­core, 61, of Mas­sachusetts. Two of the men, Mr. Morelli and Mr. Buono­core, have prior crim­i­nal records for se­cu­ri­ties fraud. Mr. Morelli is await­ing sen­tenc­ing for the ma­nip­u­la­tion of a com­pany called Su­per Nova Inc. The Su­per Nova scheme also in­cluded Mr. Buono­core, who pleaded guilty to those charges on Nov. 19, 2015. His crim­i­nal record in­cludes an 18-month sen­tence that he re­ceived in a se­cu­ri­ties fraud case from 2000.

The SEC is seek­ing dis­gorge­ment of ill-got­ten gains and ap­pro­pri­ate civil penal­ties. It is also seek­ing penny stock bans for Mr. Paolucci, Mr. Rose and Mr. Draper.

(*SEC)

Newspapers in English

Newspapers from Canada

© PressReader. All rights reserved.