New York Securities Fraud Attorney: What to Do if Charged with Penny Stock Fraud
Definition of Microcap Fraud
At Bukh Law Firm, PLLC, our New York criminal defense lawyers have a long track record of defending clients accused of all types of securities fraud offenses. We can put our extensive legal knowledge and experience to work on your case.
Understanding Pink Sheet Scams
Pink sheets are not very well regulated because stocks traded on the Pink Sheets are usually below the threshold for Securities and Exchange Commission Regulation and because only brokers are regulated by the NASD, not the stocks that brokers are trading. Because of the lax regulations, pinks sheet scams are common.
Some examples of pink sheet scams include:
- Bogus research reports: Firms create “reports” on stocks and try to make them appear as if they came from legitimate brokerages. The reports are distributed to try to encourage the purchase of a particular stock.
- Reverse mergers: Pink sheet listed companies can be purchased and have their names changed. There is far less regulation when a company is taken over rather than when a company wants to issue a new stock. These pink sheet companies can end up having no
assets andmay be just shell companies.
Bogus research reports and reverse mergers are two ways in which the prices of stock shares in the Arkady Bukh has a long track record of representing clients accused of serious federal and state crimes in NYC TOP RATED ON: SUPER LAWYERS, AVVO, NATIONAL TRIAL LAWYERS
Top Rated Criminal Lawyer
Arkady Bukh has a long track record of representing clients accused of serious federal and state crimes in NYC
TOP RATED ON: SUPER LAWYERS, AVVO, NATIONAL TRIAL LAWYERS
Because stocks sold on pink sheets usually have very low initial values, a great many shares of these penny stocks can be purchased for very low prices. When the pump and dump scheme is successful, the stock prices can increase dramatically and significant profit can be achieved. The problem is, although regulating penny stock fraud is difficult, there are some laws that you could be accused of breaking if you participate in a pump and dump scheme.
Penalties for Penny Stock Fraud or Microcap Fraud
In December of 2014, a penny stock promoter was charged by the Securities and Exchange Commission with orchestrating a pump and dump scheme. The SEC charged the defendant with violating:
- Section 17
(A) of the Securities Act of 1933: This provision makes it a criminal offense for anyone involved in the offer or sale of securities to use interstate commerce to employ a scheme or artifice to defraud; to obtain money or property by making untrue statements of material facts or omissions of material facts; or to engage in transactions, business or practices that deceive purchasers.
- Rule 10b-5 of the Securities Exchange Act of 1934: This provision makes it a criminal offense to employ schemes or artifices to defraud; to make materially false statements or omit material facts; or to engage in any fraudulent or deceitful practices in connection with the purchase or sale of any securities.
Defendants could also be charged under other federal and state statutes, including being charged with wire fraud or mail fraud if any communications that were part of the pump and dump scheme were sent via wire or mail.
Getting Legal Help if You Are Accused of Microcap Fraud
Criminal penalties for