SEC charges 16 people for raking in $194 million in illicit proceeds from international penny-stock fraud scheme

• Sixteen people face charges for an international "pump and dump" scheme of penny stocks, the SEC said Monday.
• The SEC alleged the defendants generated $194 million in illicit proceeds in the multiyear scheme.

Sixteen people face charges for participating in an international penny-stock fraud scheme that illicitly generated $194 million in proceeds, the Securities and Exchange Commission said Monday.

The charges resulted from an investigation in more than 20 countries including the UK, Canada, Monaco, Spain, and The Bahamas, the agency said in a statement. The charges were associated in part with parallel criminal actions announced by the US Attorney's Office for the Southern District of New York.

The SEC said the defendants in the alleged multiyear scheme devised some of the most complex microcap stock fraud schemes it has seen.

It alleged that several defendants, in a variety of roles, accumulated the shares in penny stocks through difficult-to-unveil, offshore nominee companies. Once some of the defendants had amassed a significant majority of the shares, some secretly funded promotional campaigns to promote the stocks to unsuspecting investors in the US and elsewhere.

When the campaigns spurred higher prices and stronger demand for the stocks, some of the defendants sold them through trading platforms in Asia, Europe and the Caribbean for significant profit, said the SEC.

"By locating their operations overseas, using encrypted messaging and operating through a convoluted network of offshore accounts, the defendants hoped to avoid detection of the massive frauds we allege they perpetrated on US markets and investors," said Gurbir Grewal, director of the SEC's Enforcement Division.

The SEC is seeking, among other things, conduct-based injunctions against 11 of the defendants as well as bans on eight defendants to prevent them from serving as corporate officers and directors.