1. Former Biotech Finance Chief Sentenced to Prison for Fraud
Richard Margulies, the former CFO of a biotechnology company known as Advatech (OTC: ADVA.PK), has been sentenced to 51 months in prison for attempting to artificially inflate the company’s stock price two years ago, Dow Jones reported. In June of 2008, Dow Jones said, Margulies hired two investors to execute “manipulative” trades in Advatech’s stock and then paid them illegal kickbacks in exchange for their services. Margulies was indicted on conspiracy and fraud charges six months later, Dow Jones said, and ultimately pleaded guilty to those crimes. After serving more than four years in prison, Dow Jones said, Margulies must spend another five years on supervised released and cannot serve as an officer or director of any publicly traded companies during that time.
2. Cyber Market Group CEO Pleads Guilty to Running Ponzi Scheme
Patrick Rakotonanahary, the CEO of Virginia-based Cyber Market Group, has pleaded guilty to operating a classic Ponzi scheme, the Associated Press reported. According to government prosecutors, the A.P. said, Rakotonanahary told his clients that he would use their funds on foreign currency trades but wound up spending most of that money on personal expenses instead. He pleaded guilty to criminal charges this week, the A.P. said, and is scheduled to be sentenced early next year for his crimes.
3. Ponzi Buster Punished for Posing as FBI Agent During Bogus Raid
Michael David Sanders, a self-styled fraud buster who offered to help victims of a major Ponzi scheme, has been sentenced to home confinement and probation for conspiring to pose as an FBI agent during a bogus government raid, The Sacramento Bee reported. According to government prosecutors, the newspaper said, Sanders and three other defendants – Craig Anderson, Sean Smartt and Cassandra Moore – impersonated federal officials in an attempt to crack down on a $40 million Ponzi scheme operated by Equity Investment Management Trading and its owner Anthony Vassallo. Shortly afterwards, the newspaper said, legitimate government authorities shut down the firm and charged Vassallo with suspected fraud. Like Anderson and Smartt, the newspaper noted, Sanders has now been sentenced to 180 days of home confinement and two years of probation for staging the bogus raid. In addition, the newspaper said, Moore has been sentenced to two years of probation for her role in the drama. Meanwhile, the newspaper added, Vassallo still faces unresolved charges for allegedly masterminding the suspected Ponzi scheme.
4. Whistleblowers Begin Flooding SEC with 'High-Quality' Tips
Thanks to a generous new bounty program, Dow Jones reported, whistleblowers have stepped up their efforts to alert the U.S. Securities and Exchange Commission about possible cases of fraud before they lead to massive losses for investors. Under sweeping financial reforms, Dow Jones noted, tipsters providing “original information” about potential fraud can receive 10% to 30% of any sanctions levied by the SEC in cases involving at least $1 million in penalties. In the past, Dow Jones said, SEC paid out only $1.159 million to informants – and limited those rewards to cases involving insider trading – over the course of more than 20 years. “We’ve gotten some very high-quality tips,” an SEC official told Dow Jones, since announcing the big changes.
5. Former Enron Exec Remains Jailed Despite Court Decision
Jeffrey Skilling, the former president of Enron, has failed to convince a federal judge to release him on bail despite a major court ruling that may undermine the 2006 conviction that sent him to jail in the first place, The Wall Street Journal reported. Skilling submitted his bail request after a June ruling by the U.S. Supreme Court, the Journal said, which determined that federal prosecutors had improperly relied on the so-called “honest services” rule to convict him of fraud. Skilling’s attorneys now claim that their client’s entire conviction should be overturned, the Journal said, although prosecutors argue that they presented enough evidence to convict him of other crimes – such as securities fraud – as well. An appeals judge has rejected Skilling’s bail request in the meantime, the Journal added, issuing a one-sentence ruling on Friday that offered no reasons for his decision.
6. Ponzi Scheme Wipes out Huge Crowd in Poor African Nation
More than 100,000 residents in the poor West African country of Benin have lost their life savings in a massive Ponzi scheme, the Sunday Observer reported, with millions more – who pooled their money together – directly impacted by the far-reaching investment scam. Lured by the promise of generous returns from a company endorsed by leading politicians, the newspaper said, residents of Benin -- where many live on less than $2 a day – entrusted $130 million to Investment Consultancy and Computering Services (ICC) before the doomed company shut its doors last month. Angry residents are now calling for the resignation of Benin President Boni Yayi, the newspaper said, who joined other government officials in promoting ICC before it ultimately failed. “We have elected a chief of state to protect the people,” one of Yayi’s leading political opponents told the newspaper. “He has betrayed the confidence placed in him by the people, and he should be prosecuted before the high court of justice.” Yayi has “attempted to limit the damage to his administration” by cracking down on others associated with ICC, the newspaper said, including more than a dozen company executives who have already been sent to jail.
7. Madoff 'Feeder Fund' Ordered to Pay Millions in Restitution
Gabriel Capital, an investment firm that served as a so-called “feeder fund” for Bernard Madoff’s massive Ponzi scheme, has been ordered to pay millions of dollars to investors who lost money in the scam, Reuters reported. According to court records, Reuters said, arbitrators have ruled that Gabriel should cover $12.74 million worth of losses suffered by two New Jersey investment funds that relied on the firm to manage its money. Overseen by hedge fund manager Ezra Merkin, Reuters noted, Gabriel wrote down its Madoff-related investments to zero after the Ponzi scheme collapsed.
8. Berkshire Resources Defendants Face Big Payments in SEC Case
The U.S. Securities and Exchange Commission is demanding more than $16 million in restitution and penalties from five defendants accused of fleecing investors through a firm known as Berkshire Resources. Between April 2006 and December 2007, the SEC says, the defendants used Berkshire to raise $15.5 million from 265 investors through the fraudulent sale of securities. According to the SEC, David Rose – “who had an extensive disciplinary history” – secretly ran Berkshire, while his son Jason Rose presented himself as the company’s leader instead. The defendants also allegedly misled the public with false information about the younger Rose’s experience, the planned use of investor funds and the projected rates of return. David Rose has been ordered to pay $15.7 million in restitution and penalties, while his son must pay about $320,000 for his own role in the alleged scam. Both men have also been barred from associating with any brokers or dealers in the future. Three other defendants – Mark Long, Brian Rose and Joyce Rose – have been hit with more than $1 million in restitution payments as well.
9. Longtime Petters Aide Sentenced to Prison in Big Ponzi Case
Deanna Coleman, the former vice president of operations for an investment firm owned by convicted Ponzi schemer Tom Petters, has been sentenced to one year in prison for her role in the $3.7 billion scam, the Associated Press reported. Coleman blew the whistle on Petters and played a key role in his conviction, the A.P. said, but a federal judge ruled that she should still serve jail time for assisting with the long-running scheme. “She was involved in this offense for a substantial period of time,” Judge Richard Kyle stated in the article. “She was not a minor player. She was the face of the operation in the company itself. Her criminal activity was extensive while she was there, and I don’t think that can be underplayed.” Although Coleman could have faced up to five years in prison on fraud-related charges, the A.P. noted, her attorney had hoped that – due to her extraordinary cooperation in the case – she might avoid any jail time at all. Coleman must surrender by Oct. 13, the A.P. said, while Petters himself is already serving a 50-year prison term for orchestrating the massive scam.
10. First United Funding Leader Pleads Guilty to Bank Fraud
Corey N. Johnston, the owner of Minnesota-based First United Funding, pleaded guilty this week to scamming banks through a multimillion-dollar Ponzi scheme, Dow Jones reported. Between 2005 and 2009, Dow Jones said, Johnston secured more than $79 million from 17 lenders by selling them loans that had already been sold to others. Johnston used the proceeds to repay other loans, Dow Jones said, and to cover his own personal expenses. He pleaded guilty on Thursday to bank fraud and tax violations, Dow Jones said, and could face up to 30 years in prison when he is formally sentenced for his crimes.
TheStreetSweeper in the News
Melissa Davis, senior editor of The Street Sweeper, poses with celebrity stock picker Jim Cramer after a recent taping of his "Mad Money" television show. Davis worked as an investigative reporter for TheStreet.com, where Cramer serves as chairman, before assuming her current role at The Street Sweeper.
China Sky One Medical Caught in the Eye of a Storm
by Melissa Davis, 9/7/2010 7:31:24 AM
Hurt by mounting government scrutiny, China Sky One Medical (Nasdaq: CSKI) – once a Wall Street darling – has found itself in a world of incredible pain.
In a press release issued late Friday, when many investors had already left work for the long holiday weekend, CSKI dropped a devastating bombshell. The Chinese pharmaceutical supplier, already a prime target of bears suspicious of its regulatory filings, suddenly slashed its full-year guidance as its own distributors attempt to distance themselves from the controversial company. Specifically, CSKI revealed that it will fall well short of revenue and profit targets for 2010 because “several major distributors” had severed ties with the company – the subject of a formal investigation by the U.S. Securities and Exchange Commission – due to unwanted government scrutiny of their own business practices.
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Local.com Rolls the Dice on Another Troubling Deal
by Melissa Davis, 8/10/2010 8:38:54 AM
Local.com (Nasdaq: LOCM) better hope that investors don’t start using Google (Nasdaq: GOOG), its far more powerful rival, to search for information about the last company it acquired.
Last month, Local agreed to pay $5 million -- plus another $5.9 million in potential earn-out bonuses -- for a startup technology company that provides “domain-based local advertising solutions” to small business customers. When announcing that transaction, which looks rather extravagant for a company that’s recorded net losses for the past five years, Local identified its buyout target as Octane360 and the firm’s leader as Adam Rioux. Local only later revealed in an official 8-K filing that it had actually purchased Simply Static, doing business as Octane360, a company co-founded by Rioux and a second man by the name of Mark Roah.
Local may have buried this information for a reason. In 2003, Roah agreed to plead guilty to criminal charges for artificially inflating the revenue at L90 – an Internet firm where he served as senior vice president of business development – and another web-based company called Homestore.com. According to Internet records, Roah received a one-year prison sentence, followed by three years of supervised release, as punishment for those crimes. A man with the same name and age as Roah served time in federal prison, an official database shows, regaining his freedom less than three years ago.
more...Clicker 'Body-Slammed' after Tout by Pro Wrestler
by Melissa Davis, 9/7/2010 7:36:07 AM
Shawn Ambrosino may have retired from professional wrestling, but as a penny stock promoter – touting the likes of Clicker (OTC: CLKZ.OB), Clenergen (OTC: CRGE.OB) and Enhance Skin Products (OTC: EHSK.OB) – he can still inflict an awful lot of pain.
This month, Ambrosino delivered his latest knockout blow with a powerful recommendation of CLKZ that has since left investors reeling. With CLKZ sitting at $1 a share, Ambrosino urged investors to buy the stock before it surged past $20 as the company – a cash-poor outfit with just a handful of employees – conquered Craigslist to become the new heavyweight leader of the online classified advertising world. CLKZ did march higher on that paid tout, ultimately reaching $1.37 a share on Wednesday, but never approached even Ambrosino’s $5 short-term target before staging a remarkable collapse.
The stock, hammered by a sudden selling spree that began the same day it peaked, now fetches just 53 cents a share. Even at that lower price, however, CLKZ still boasts a market value of $31.2 million that looks rather lofty for a company that – just six weeks ago – cautioned that it lacked the funds necessary to finance its operations for more than 30 days.
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Tradeshow, Skymark Kicked off the Stage
by Melissa Davis, 8/30/2010 3:07:16 PM
Canadian regulators aren’t buying the story that Tradeshow Marketing (OTC: TSHO.PK) and Skymark Research – a paid promoter led by the son of TSHO’s founder – tried so hard to sell.
The Alberta Securities Commission has issued a cease-trading order for TSHO’s stock, while banning Skymark from trading or recommending any securities, after uncovering tell-tale signs of a classic pump-and-dump scheme. When explaining its move on Monday, the ASC cited concerns originally raised by TheStreetSweeper in a detailed investigative report almost six months ago. (Click here for the original story, complete with links to backup documents.)
Specifically, the ASC claimed that TSHO had soared on bullish Skymark forecasts secretly generated by relatives connected to the company. The ASC also noted that John Kirk, the sole director of Skymark and the son of TSHO’s founder, “held a significant number of shares” in the company – as did TSHO founder Bruce Kirk himself – at the time of the stock-boosting promotions. It pointed out that Ben Kirk, another son of the founder, worked for Skymark during the publicity campaign as well.
more...Houston American: How Slick Can This Oil Company Be?
by Chris Carey, 6/30/2010 1:38:39 PM
An oilfield services company headed by one of Houston American's directors, John P. Boylan, also went under, in part because he took hundreds of thousands of dollars in loans from the business without the knowledge or consent of his partners.
A third member of Houston American's five-person board, Edwin C. Broun III, was described in court documents last year as suffering from alcohol-related brain damage that could affect his ability to "process information and make sound decisions." The filing, submitted in his defense, characterized him as a recluse who slept all day, drank all night and hadn't opened his mail in two years.
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| Stock Ticker | Article | Original Price | Price Today |
| CLKZ | Aug. 30 | $0.53 | Check |
| LQMT | Aug. 19 | $0.76 | Check |
| LOCM | Aug. 4 | $6.12 | Check |
| ESPH | June 25 | $1.49 | Check |
| APOL | June 15 | $47.60 | Check |
| BPI | June 15 | $19.63 | Check |
| SILA | May 27 | $1.14 | Check |
| FLPC | May 27 | $0.97 | Check |
| AMEL | May 27 | $1.05 | Check |
| STP | May 17 | $10.62 | Check |
| BGBR | April 26 | $1.21 | Check |
| NNLX | April 16 | $1.10 | Check |
| CHTL | April 9 | $0.74 | Check |
| AMLM | March 25 | $1.02 | Check |
| LTUM | March 25 | $1.25 | Check |
| TRGL | March 11 | $9.56 | Check |
| TSHO | Feb 24 | $1.16 | Check |
| CSKI | Feb 19 | $18.30 | Check |
| GXDX | Feb 15 | $31.69 | Check |
| JYHW | Jan 19 | $1.83 | Check |
| AENY | Jan 19 | $4.51 | Check |
| CLRH | Dec 08 | $1.35 | Check |
| NXTH | Dec 08 | $2.28 | Check |
| IMGG | Nov 22 | $1.39 | Check |
| MEVT | Nov 16 | $0.35 | Check |
| AWSL | Nov 16 | $3.29 | Check |
| FRPT | Oct 13 | $5.84 | Check |
Investors must be properly armed in order to protect themselves against the dangers of Wall Street. To help out, The Street Sweeper has mined the Internet for the most powerful weapons available to investors researching publicly traded companies. In our “Loaded Weapons” section, you’ll find direct links to corporate documents filed with the SEC, conference call transcripts published by Seeking Alpha, insider stock sales tracked by Insider-Monitor.com and popular investment tools offered by Yahoo! Finance. You can also identify the promoters behind current penny stock campaigns – and the compensation they are receiving – by connecting to StockPromoters.com. You can link to other websites that are conducting topnotch stock investigations as well. Click here now.
