Stock scamsters employ a seemingly endless variety of ploys to seduce
unsuspecting investors. Not long ago a group of pump and dumpers were
leaving phony messages on telephone answering machines. People
receiving the messages were supposed to believe that the caller had
dialed them by accident, intending to leave a stock tip for a friend.
StockPatrol.com warned investors when the scam surfaced in August 2004,
and the SEC filed complaints against the wrongdoers in May 2005. See Sorry Wrong Number and Phony Phone Calls.
But phony phone calls were not the only technique in vogue in 2004. If telephone messages worked, why not try faxes? This week the SEC caught up with a group of individuals who devised a scam to mislead investors into believing they had inadvertently received confidential stock tips faxed by a stockbroker to his customer. The handwritten faxes seemed to embody an urgent message from a financial planner to his client, “Dr. Michel,” urging him to buy shares that were about to triple in price.
There was, in fact, no broker and no Dr. Michel. Instead, according to charges filed by the SEC on July 15, 2005, an individual named Joshua Yafa and his company, Global Media Marketing, distributed approximately 153,000 phony faxes in December 2004, urging recipients to buy shares of AVI Global, Inc. AVI had hired Yafa as a public relations consultant and rewarded him with AVI shares. According to the SEC, AVI’s stock price soared by 25% the day after the faxes were transmitted and Yafa dumped his shares, reaping more than $300,000 in proceeds.
That, however, was not the end of the story. The SEC says that Yafa’s misleading fax soon engendered a copycat scam. According to the Commission’s complaint, an individual named Michael O'Brien Pickens obtained a copy of Yafa's "Dr. Mitchel" fax and replaced AVI with three different microcap companies Pickens had been promoting - Data Evolution Holdings, Inc. (DTEV), Infinium Labs, Inc. (IFLB), and Soleil Film, Inc. (SFLM). The Commission claims that Pickens took Yafa’s scheme to a new level, sending out almost a million of the modified faxes. He then made more than $300,000 when shares of all three companies increased by as much as 100%.
The Commission also filed fraud charges against Serafin Sierra, a salesman at Vision Lab Telecommunications, Inc., the "fax blasting" company that transmitted all of the "Dr. Mitchel" faxes. The SEC asserts that it was Sierra who provided Pickens with a copy of the original Yafa fax, thereby facilitating the scheme.
The SEC action may be the least of the problems facing the individuals who orchestrated this scheme. The United States Attorney's Office for the Southern District of New York has initiated a related criminal proceeding.
Hartley T. Bernstein is a corporate and securities attorney and civil litigator with a specialty in business transactions and civil litigation.
But phony phone calls were not the only technique in vogue in 2004. If telephone messages worked, why not try faxes? This week the SEC caught up with a group of individuals who devised a scam to mislead investors into believing they had inadvertently received confidential stock tips faxed by a stockbroker to his customer. The handwritten faxes seemed to embody an urgent message from a financial planner to his client, “Dr. Michel,” urging him to buy shares that were about to triple in price.
There was, in fact, no broker and no Dr. Michel. Instead, according to charges filed by the SEC on July 15, 2005, an individual named Joshua Yafa and his company, Global Media Marketing, distributed approximately 153,000 phony faxes in December 2004, urging recipients to buy shares of AVI Global, Inc. AVI had hired Yafa as a public relations consultant and rewarded him with AVI shares. According to the SEC, AVI’s stock price soared by 25% the day after the faxes were transmitted and Yafa dumped his shares, reaping more than $300,000 in proceeds.
That, however, was not the end of the story. The SEC says that Yafa’s misleading fax soon engendered a copycat scam. According to the Commission’s complaint, an individual named Michael O'Brien Pickens obtained a copy of Yafa's "Dr. Mitchel" fax and replaced AVI with three different microcap companies Pickens had been promoting - Data Evolution Holdings, Inc. (DTEV), Infinium Labs, Inc. (IFLB), and Soleil Film, Inc. (SFLM). The Commission claims that Pickens took Yafa’s scheme to a new level, sending out almost a million of the modified faxes. He then made more than $300,000 when shares of all three companies increased by as much as 100%.
The Commission also filed fraud charges against Serafin Sierra, a salesman at Vision Lab Telecommunications, Inc., the "fax blasting" company that transmitted all of the "Dr. Mitchel" faxes. The SEC asserts that it was Sierra who provided Pickens with a copy of the original Yafa fax, thereby facilitating the scheme.
The SEC action may be the least of the problems facing the individuals who orchestrated this scheme. The United States Attorney's Office for the Southern District of New York has initiated a related criminal proceeding.
Hartley T. Bernstein is a corporate and securities attorney and civil litigator with a specialty in business transactions and civil litigation.
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