Pump and Dump A Report Identifying Suspicious Market Activity
Michael Dortheimer 8/5/2010
Contents
Executive Summary ...... 3 Introduction ...... 4 Lithium Corporation (LTUM) ...... 5 Background ...... 5 Analysis of Lithium Corp’s Market Activity ...... 7 Barron Energy Incorporated (BROE) ...... 10 Background ...... 10 Analysis of Barron Energy Incorporated’s Market Activity ...... 11 Pacific Blue Energy Corporation (PBEC) ...... 12 Background ...... 12 Analysis of Pacific Blue Energy Corp. Market Activity ...... 13 Gold American Mining Corporation (SILA) ...... 15 Background ...... 15 Analysis of Gold American Mining Corp Market Activity ...... 16 A5 Laboratories Incorporated (AFLB) ...... 19 Background ...... 19 Analysis of Trading Activity ...... 19 Tuffnell Limited (TUFF) ...... 21 Background ...... 21 Analysis of Trading Activity ...... 22 Brand Neue Corporation (BRNZ) ...... 23 Background ...... 23 Analysis of Trading Activity ...... 23 Guinness Exploration Incorporated (GNXP) ...... 25 Background ...... 25 Analysis of Trading Activity ...... 25 Conclusion ...... 27 Appendix A: Corporate Officers Associated with Multiple Potential Pump and Dump Schemes ...... 28 Appendix B: List of Common Internet Companies Promoting and Hyping Stocks Associated with Suspicious Trading Activities ...... 32
2 Executive Summary
The Federal Bureau of Investigation’s website lists ten common types of fraud. The list includes well- known fraud types such as telemarketing, prime bank fraud and the, now infamous, Ponzi scheme. There is no reference made to a Pump and Dump. Yet, this form of fraud is ongoing in our financial markets. The companies participating are not billion dollar corporations, such as Apple or Microsoft that trade on the New York Stock Exchange or the NASDAQ. Instead, the companies that engage in Pump and Dump schemes often trade on OTC Bulletin Board (OTCBB), an electronic inter-dealer quotation system. The OTCBB has fewer regulations and thus makes fraud more difficult to detect. The one certain way to detect fraud, however, is by market makers promptly reporting suspicious trading activity to the Financial Industry Regulatory (FINRA), the body that oversees OTCBB and the market makers.
This report profiles eight different companies listed on the OTCBB: Lithium Corporation, Barron Energy, Pacific Blue Energy, Gold American Mining, A5 Laboratories, Tuffnell, Brand Neue, and Guiness Exploration. Characteristic of all the companies is the extent of their suspicious market activity. In the case of all of these companies, Suspicious Market Activity Reports should have been promptly filed to FINRA to begin an investigation that would result in perpetrators of Pump and Dump fraud being brought to justice.
Despite market makers being obligated to file reports as part of Anti-Money Laundering (AML) requirements, suspicious trading activity – common on the OTCBB – is often not reported. This may be because market makers who submit these reports would ostensibly be sacrificing their own potential revenue. However, there are rules and regulations that are mandatory in the Securities industry to protect investors and keep markets secure. There are many unwitting investors who get caught up in these schemes, buying company shares for numerous speculative reasons, often based on misleading company hype, and suddenly end up with virtually worthless shares.
3 Introduction
"Pump and Dump” is a form of stock fraud where the share price of a firm is artificially increased with false and misleading statements, usually in the form of press releases or internet hype. Stock prices become inflated and over-valued stock at the inflated price for a profit. In some cases, the company’s stock may be, essentially, worthless. There are numerous web sites that promote and hype these companies, enhancing the profitability of these schemes.
Market makers facilitate the buying and selling of shares on the OTCBB. Market makers are registered and regulated by FINRA as well as the companies listed for trading. Their position on the front line of trading makes their observations of trading activity paramount to the integrity of financial markets.
Genova Biotherapeutics (GVBP.OB) – The Classic Pump and Dump
The Securities and Exchange Commission temporarily suspended trading of GVBP.OB shares on September 23, 2009. The events leading to the suspension was continuous suspicious trading activity.
The average daily number of shares traded from August 25, 2009 until September 3, 2009 was 439,000. Suddenly, September 4 the trading volume exploded to 4.34 million shares. On the next trading day, following the Labor Day Holiday, trading volume grew to 31 million shares. The average daily volume for the following seven trading days was 52 million shares a day. The share price moved from below $0.04 August 25, 2009 to the high sale of $1.18 on September 16, 2009. On that day, the dump was completed when the share price closed at $0.55 with a trading volume of 85 million shares.
During this time there were false and misleading news releases. The company was being hyped heavily on the internet. Market makers should have promptly filed a suspicious trading activity report because of the excessive trading volume. However, none was filed. Instead, the excessive trading volume allowed the market makers the opportunity to make a significant amount of money while the average investor almost certainly lost money.
4 Lithium Corporation (LTUM)
Background
Many companies that engage in a pump and dump are actually shell companies or do no legitimate business. Some can be simply a website and some letterhead made with Microsoft Office. However, they must present themselves as legitimate. Included below is the company statement and history from Lithium Corp.’s website. Also included is an excerpt from an article in Dow Jones Market Watch detailing how hype was created for Lithium Corp.
Company Statement (from website)
We are an exploration company based in Nevada devoted to discovery and development of new, clean energy sources. We have acquired and continue to explore and develop lithium properties in our home state, as well as other lithium rich areas in the continental United States.
Although we acquire and develop our own properties, we are always looking for new ventures and welcome any information on similar projects. We are also interested in entertaining joint ventures or other arrangements with companies that may have an interest in our Lithium projects
Company History (from website)
Incorporated in Nevada Jan. 30, 2007, as Utalk Communications Inc.; name changed to Lithium Corporation Sept. 30, 2009, through the merger of a wholly owned subsidiary. On Oct. 19, 2009, the company acquired all of the issued and outstanding Common stock of Nevada Lithium Corporation. The company issued 12,350,000 Common shares to the former stockholders of Nevada Lithium Corporation. Also, pursuant to the terms of the share exchange agreement, 220,000,000 Common shares of the company were cancelled. Nevada Lithium Corporation was incorporated in Nevada Mar. 16, 2009, as Lithium Corporation; name changed to Nevada Lithium Corporation Sept. 10, 2009.
Read the Fine Print March 26, 2010- Market Watch by Chuck Jaffe
So what made Lithium stand out to average investors is the advertising circular for Untapped Wealth, which amounted to 15 pages of hype, a half page of fine print and a half-page, half-hearted attempt to get people to subscribe to the newsletter.
Newsletters do advertising like this all the time. In some cases, they are shilling for their own product -- those are the pieces that show a portfolio or a history of past picks with a few current ideas thrown in -- and in other cases they're touting a stock -- basically all of the materials explain the joys of one specific
5 security. Typically, the company represented by the stock is not behind the hype; instead, it is a third party who lays out big bucks in an attempt to move shares.
Mark Hulbert of the Hulbert Financial Digest, which tracks the performance of investment newsletters, doesn't follow Untapped Wealth, but said that many newsletter editors "have been doing stuff like this because marketing has been tough over the last couple of years." (Hulbert Financial Digest is a service of Market Watch, the publisher of this report.)
"Even newsletters that have good track records will sometimes wind up doing something like this, so we can't make a blanket statement that any stock recommended this way is bad or that only bad newsletters do this," Hulbert said. "An investor who gets one of these probably needs to learn more about both the newsletter making the recommendation and the stock being recommended."
Untapped Wealth is the "flagship newsletter" of Trinity Investment Research, which seeks to "exploit wealth from unexamined, underdeveloped assets." The report on Lithium Corp. clearly is focused on that idea.
Lithium, of course, is considered a way to re-develop battery power, so that at some point in the future you could have a lithium-battery-powered laptop which only needs to be recharged once per year, or a hybrid car (getting 230 miles to the gallon) or cell phone.
That kind of potential is, indeed, enormous. But potential is sometimes a nine-letter word for "lacking achievement." Lithium Corp. might benefit from the trends, but doesn't seem to have the resources necessary to be a game-changing, life-altering business. The company, according to press releases, has acquired the rights to several properties hoping to someday supply lithium to the folks making those batteries to power that revolution.
An editor at Trinity Investment Research, who asked not to be identified, said that there is a distinct difference between the newsletters and the promotional pieces, specifically that the regular newsletter research is "unbiased," whereas the flyer's "research" is bought and paid for.
Perhaps that position should be considered when, on page 13, just above the fine print, the newsletter piece suggests that the short-term price target on LTUM shares is $5 (it pegged the price at $1, which is where it was before the hype hit), with medium- and long-range prospects being as high as $17.50. The recommended "action to take" is to "Call your broker now!"
Immediately below that line, the fine print says that the entire promo piece is "not to be construed as a recommendation ... to buy ... LTUM." The fine print goes on to note that a company called Citadel Capital paid Capital Financial Media more than $2.4 million for the advertising effort, of which Untapped Wealth received an editorial fee of just $3,000 to produce the piece. Tim Fields would not comment for this story.
Ultimately, however, stocks prove themselves in the numbers, and LTUM has none to speak of.
6 The stock trades like crazy -- an average daily volume of nearly 1 million shares over the last three months -- but that may have more to do with the 60-1 split than anything else. The most recent financial numbers are from last September, at which point the company had negative equity of $14,000, and had $1,000 in cash. That money amounted to the company's entire pool of assets. For the first nine months of 2009, the business lost $43,000.
Yes, you read that right, this stock being hyped as the next Exxon quotes its financial figures in the thousands, not the millions.
There's no denying that the stock has traded nearly 1 million shares per day, on average, for the last three months, but whoever is taking that action either is looking for a quick-hit turnaround or knows something the rest of the world doesn't.
"While there is always a slight chance the company could turn things around, the odds are probably the same as winning the lottery," said Brent Wilsey of Wilsey Asset Management in San Diego. "The only one I think making money is probably the marketing company."
Looking at Lithium with some foresight, and without the hype of a bought-and-paid-for newsletter, the fact that this is a bad idea comes clearly into focus.
Analysis of Lithium Corp’s Market Activity
Market makers conduct their business at the point of sale to maintain markets meaning, during exchange hours they buy and sell at official bids and offers.
A major responsibility of market makers that is repeatedly neglected is to make exchangers aware of suspicious trading activity. This is necessary to protect the integrity of markets. It is also imperative that those present at point of sale promptly disclose relevant information to the proper regulatory bodies. Full disclosure by market makers is needed more than ever because of electronic trading and lack of human interaction. Heavy volume spikes require market makers to fill out a report immediately. It is quite easy to visualize a spike in volume after the fact. These regulations need to be enforced with regularity and hefty fines.
The chart on the following page lists the daily closing price and volume of Lithium Corp. (LTUM) stock over a three month period from December 21, 2009 to March 31, 2010. Daily volume over one million shares are bold.
Based on the market activity, it is quite clear that a suspicious activity report should have been filed by the market makers after the extraordinary increase in trading volume beginning January 4, 2010.
7 Daily Activity Lithium Corp. Shares from December 21, 2009 until March 31, 2010
Date Close Volume Date Close Volume 12/21/2009 0.7 - 2/10/2010 1.25 2,653,000 12/22/2009 0.69 100 2/11/2010 1.31 3,223,900 12/23/2009 0.7 5,700 2/12/2010 1.31 1,565,300 12/24/2009 0.7 12,500 2/16/2010 1.27 1,757,600 12/28/2009 0.75 500 2/17/2010 1.25 1,313,600 12/29/2009 0.84 2,800 2/18/2010 1.28 1,647,800 12/30/2009 0.9 2,500 2/19/2010 1.33 1,738,800 12/31/2009 0.9 4,000 2/22/2010 1.33 1,715,000 1/4/2010 1.05 457,100 2/23/2010 1.34 1,239,600 1/5/2010 1.14 1,228,400 2/24/2010 1.32 813,400 1/6/2010 1.28 1,858,800 2/25/2010 1.36 1,373,300 1/7/2010 1.37 1,632,000 2/26/2010 1.3 746,400 1/8/2010 1.33 740,700 3/1/2010 1.29 711,400 1/11/2010 1.31 400,700 3/2/2010 1.25 935,800 1/12/2010 1.3 358,900 3/3/2010 1.18 1,535,700 1/13/2010 1.34 408,200 3/4/2010 1.1 830,000 1/14/2010 1.3 608,800 3/5/2010 1.15 801,500 1/15/2010 1.24 229,900 3/8/2010 1.15 1,000,400 1/19/2010 1.13 551,900 3/9/2010 1.26 1,288,500 1/20/2010 1.22 549,000 3/11/2010 1.22 646,500 1/21/2010 1.22 638,200 3/12/2010 1.29 443,200 1/22/2010 1.17 329,800 3/15/2010 1.28 619,800 1/25/2010 1.19 284,700 3/16/2010 1.29 453,100 1/26/2010 1.12 496,800 3/17/2010 1.28 854,700 1/27/2010 1.1 322,300 3/18/2010 1.26 810,300 1/28/2010 1.13 294,600 3/19/2010 1.23 728,500 1/29/2010 1.1 216,500 3/22/2010 1.33 1,598,700 2/1/2010 1.07 296,800 3/23/2010 1.29 1,434,200 2/2/2010 1.05 208,100 3/24/2010 1.25 1,471,800 2/3/2010 1.05 421,200 3/25/2010 1.24 1,021,600 2/4/2010 1.02 370,300 3/26/2010 1.26 713,000 2/5/2010 1.06 681,500 3/29/2010 1.14 1,813,900 2/8/2010 1.04 713,000 3/30/2010 1.03 1,495,200 2/9/2010 1.11 1,053,600 3/31/2010 1.04 862,700
8 In the table below, the volume surge is from week 2 to week 3 is quite evident. The surge is actually 47 times the prior week’s average volume. Taking a peak back at the data on the prior page, showing daily volume, we all can clearly see trading activity that looks quite suspicious. No later than the close of business of January 5, that a Suspicious Activity Report should have been filed by all market makers in the issue. On January 5 the share volume was 30 times greater than the volume of December 31.
Week Beginning Avg. Daily Volume
12/21/2009 4700 12/28/2009 2500 1/4/2010 1,183,000 1/11/2010 401,000 1/19/2010 517,000 1/25/2010 323,000 2/1/2010 396,000 2/8/2010 1,842,000 2/16/2010 1,614,000 2/22/2010 1,177,000
As shown above, this kind of surge in trading volume can often be associated with “pumping and dumping.” Pumping up a stock often takes the form of press releases and disclosures from the company to hype its stock. Often the news is in the form of press releases but may not be real, newsworthy information. For example, just before the first surge, form 8K, a disclosure form filed by Lithium Corp on December 30, 2009 reads: “On December 29, 2009, our directors approved the adoption of the 2009 Stock Plan which permits our company to issue up to 6,050,000 shares of our common stock to directors, officers, employees and consultants of our company upon the exercise of stock options granted under the 2009 Plan.”
9 Barron Energy Incorporated (BROE)
Background
Barron Energy Management and Directors (from website)
Ronnie Steinocher - President, CEO and Director
Mr. Ronnie L. Steinocher is the Chairman, President and Chief Executive Officer. Mr. Steinocher is a seasoned veteran with more than 30 years of oil and gas experience. This experience includes all upstream petroleum engineering disciplines, extensive business development skills, and general management responsibilities. He is the founder of three private oil and gas companies, two of which were merged into Baron Energy in February 2010. He has worked as an owner/operator in the Permian Basin of West Texas since 2001. Mr. Steinocher is a licensed professional engineer in the state of Texas and a member of the Society of Petroleum Engineers.
Lisa P. Hamilton - Executive Vice President, Chief Financial Officer and Director
Ms. Lisa P. Hamilton is the Executive Vice President, Chief Financial Officer and Director. Ms. Hamilton has more than 30 years of progressive oil and gas experience including, finance, land, general management, and as an owner/operator of a private oil and gas company located in the Permian Basin of West Texas since 2001. She is the founder of three private oil and gas companies, two of which were merged into Baron Energy in February 2010. Ms. Hamilton will also serve on the company's Board of Directors.
Key Information Barron Energy Incorporated’s Quarterly Report
Barron Energy reported no revenues during the six months ending January 31, 2010. Baron Energy reported selling a total 1.25 million shares of stock for net proceeds of $245,000. The selling of shares began on October 22, 2009 and continued until January 28, 2010.
10 Analysis of Barron Energy Incorporated’s Market Activity
Trading of BROE on the OTC Bulletin Board commenced on January 27, 2010. The trading volume that day was 39,000 shares. Up to and including trade date April 9, the average daily volume was 12,600 shares. On trade date April 13, volume surged to 221,000 shares (17.5 X greater). From January 27 till April 23, the stock price moved from 0.34 to 0.49. This was a 44% increase in the share price of the company’s stock.
In their quarterly filing dated March 17, the average price on their cumulative sale of shares was 0.196. In the table below, one can clearly see the twelve fold increase in average daily volume.
Week Average Daily Last Sale End Week Average Daily Last Sale End Beginning Volume of Week Beginning Volume of Week
4/5/10 13,000 0.47 5/10/10 41,000 0.27 4/12/10 185,000 0.48 5/17/10 33,000 0.25 4/26/10 157,000 0.4 5/24/10 78.000 0.27 5/3/10 112.000 0.35 6/01/10 576.000 0.26
11 Pacific Blue Energy Corporation (PBEC)
Background
Share Structure
Outstanding Shares - 37,000,000 as of November 2009 Authorized Shares: 300,000,000 as of November 2009 Transfer Agent: Action Stock Transfer Corp. Auditor: M & K CPAS Accountant: Kim Conley Legal Counsel: CH Law Group LLC (Carrillo/Huettel, LLP)
Chairman Luniel De Beer
Mr. de Beer has been the CEOP and Chairman of the Tradeshow Marketing Company, Ltd (TSHO). Since 2007, and currently presides Chairman of Pacific Blue Energy Corporation. He is talented and accomplished Senior Executive and Corporate Officer with a proven ability to lead and fund both private and public companies in the consumer commerce and information technology industries, having raised over $3 million of funding for the Tradeshow Marketing Company, Ltd through sophisticated and institutional investments.
George M. Buckingham- Chief Operating Officer and Board Advisor
George ‘Mitch” Buckingham is the CEP of Pacific Blue Energy Cop. Mr. Buckingham has been an advocate of renewable energy and development for most of his professional career. For the past 13 years, he has been involved in various renewable energy application including traditional, solar, concentrated solar, passive solar, wind and biomass. For the past seven years, he has worked in the wind energy sector. During that time he started Ship Ahoy, KLLC which develops large renewable solar and wind energy projects. He also co-founded Sunshine Arizona Wind Energy, LLC, along with Foresight Wind Energy to develop a commercial wind project east of Flagstaff, Arizona; He supervised many aspects of the development from the initial wind speed data collection all the way through the various studies to the approved county permit for Sunshine Wind Park.
General Statement
May 13, 2010. (EDGAR Online via COMTEX) The Company was incorporated in the State of Nevada on April 3, 2007 under the name Descanso Agency, Inc. originally incorporated to enter the travel industry by establishing a specialized service travel company that serves the needs of Mexican and United States wedding planners, travel agents, and clients seeking upscale personal attention at unique hotels and spas located in Mexico. Our core business plan was intended to focus on the wedding and party destination travel. However, due to a lack
12 of available financing, the Company ceased its current operations in September 2009 relating to the travel industry and began seeking out viable alternatives.
However, on October 16, 2009, we filed a Certificate of Amendment with the Nevada Secretary of State to change our name to Pacific Blue Energy Corp. The name change reflected the Company's refocused business as an independent alternative energy company.
Our common stock is currently quoted on the OTC Bulletin Board. Our common stock has been quoted on the OTC Bulletin Board since January 14, 2008, originally traded under the symbol "DSAY.OB." On November 6, 2009, we began trading under our current symbol of "PBEC.OB."
Analysis of Pacific Blue Energy Corp. Market Activity
There is no record of any trades in the shares of PBEC until March 12, 2010, even though the shares began trading on November 5, 2009. The next time shares in the company traded were on March 12, 2010 when a total of 1300 shares traded. The following trading day on Monday March 15, 2010, 3.1 million shares traded. Without hesitation, all market makers in this issue, should have immediately filled out Suspicious Activity Reports and submitted them to the Financial Regulatory Authority (FINRA).After no activity in this issue for 4 months the average daily volume of the three week period listed below was as follows:
Week Beginning Avg. Daily Volume Closing Stock Price (End of Week) 3/15/2010 894,000 0.51 3/22/2010 1,044,000 0.83 3/29/2010 520,000 0.97
After suddenly trading 3.1 million shares, the stock proceeded to trade in excess of one million shares on four different occasions during the week period shown above.
13
14 Gold American Mining Corporation (SILA)
Background
Company History
Gold American Mining Corp. – Address 10775 Double R Blvd. Reno, Nevada 89521 was formerly known as - Silver America Inc. Prior to that it was formerly known as- The Golf Alliance Corporation.
Background of Chief Executive Officer- Johannes T. Peterson
Johannes T. Petersen has been the Chief Executive Officer, President and Chairman of Teen Glow Makeup, Inc. Mr. Petersen has been the Chief Executive Officer of Paloma Resources Inc. since June 2006 and serves as its President. He has been the Chief Executive Officer, President, Chief Financial Officer, Secretary and Treasurer of Silver America Inc. (also known as The Golf Alliance Corporation) since February 12, 2010. He has been the Chief Executive Officer and President of Century Petroleum Corp. (also known as Som Resources Inc.) since July 6, 2009 and has been its secretary & Treasurer since May 15, 2006. He is a Founder of Reflection Oil & Gas Partners Ltd., Tiger Oil & Gas Corporation Ltd., Century Petroleum Corp. and Hainan Mining Corporation Ltd. He has been the Chief Financial Officer of American Sierra Gold Corp. since September 29, 2009. He serves as Principal Accounting Officer and Chief Financial Officer of Century Petroleum Corp. and served as its Principal Financial Officer. Mr. Petersen served as the President of Century Petroleum Corp. from May 15, 2006 to October 1, 2006 and served as its Principal Executive Officer, until October 1, 2006. He served as the Chief Financial Officer, Chief Executive Officer, Secretary, Treasurer and President of Dragon Gold Resources, Inc., from July 15, 2004 to May 31, 2007.
Company Releases Promoting Gold American Mining Corp. Shares
Within one week Gold American Mining Corp was featured in three different news releases from three different promoters. Emerging Stock Report, Liberty Analytics and Skymark Research have typically promoted companies suspected of pump and dumping. Therefore, their association with Gold American Mining, and their reports are released the same week are further cause for suspicion.
MONDAY, JULY 26, 2010- Emerging Stock Report Initiates Independent Research Coverage on Gold American Mining Corp. - Globe Newswire 9:17 AM
THURSDAY, JULY 22, 2010- Liberty Analytics Co. Initiates Independent Research Coverage on Gold American Mining Corp. - Globe Newswire 9:18 AM
WEDNESDAY, JULY 21, 2010 -Skymark Research Initiates Independent Research Coverage on Gold American Mining Corp. - Globe Newswire 9:17 AM
15 Analysis of Gold American Mining Corp. Market Activity
There were 109 trading days during the period beginning November 18, 2009 until April 29, 2010. Shares of Gold American Mining Corp. did not open for trading on 94 trading days out of 109. The all inclusive average daily trade volume for the 109 trading days was 857 shares. On the 15 trading days when the stock actually did trade the average daily volume were 6200 shares. Trading volume was virtually non- existent.
On April 30, 2010, 53,397 shares traded and the stock price closed at 1.05 on OTC BB. The volume traded was 62 times the average daily volume for the prior 109 trading days. Suddenly, on May 3, 2010, 718,307 shares traded and the stock price closed at 1.16 on OTC BB. The volume traded was 550 times the average daily volume for the prior 110 trading days. The average daily volume for the week beginning May 3, 2010 was 297,000 shares a day. For the 110 trading days the average daily volume was 1300 shares and the following week 297,000 shares per day.
16 Trading Activity - Gold American Mining Corp 11/18/09 – 04/30/10
Date Close Volume 3/10/2010 0.85 10,000 1/12/2010 0.1 0 4/30/2010 1.05 53,397 3/5/2010 0.29 0 1/11/2010 0.1 0 4/29/2010 1.01 0 3/4/2010 0.29 0 1/8/2010 0.1 0 4/28/2010 1.01 0 3/3/2010 0.29 0 1/7/2010 0.1 0 4/27/2010 1.01 0 3/2/2010 0.29 0 1/6/2010 0.1 0 4/26/2010 1.01 0 3/1/2010 0.29 0 1/5/2010 0.1 0 4/23/2010 1.01 0 2/26/2010 0.29 0 1/4/2010 0.1 0 4/22/2010 1.01 0 2/25/2010 0.29 0 12/31/2009 0.1 0 4/21/2010 1.01 0 2/24/2010 0.29 0 12/30/2009 0.1 0 4/20/2010 1.01 0 2/23/2010 0.29 0 12/29/2009 0.1 0 4/19/2010 1.01 1,200 2/22/2010 0.29 0 12/28/2009 0.1 0 4/16/2010 0.8 0 2/19/2010 0.29 22,000 12/24/2009 0.1 0 4/15/2010 0.8 0 2/18/2010 0.21 0 12/23/2009 0.1 0 4/14/2010 0.8 0 2/17/2010 0.21 0 12/22/2009 0.1 0 4/13/2010 0.8 400 2/16/2010 0.21 0 12/21/2009 0.1 0 4/12/2010 1.1 514 2/12/2010 0.21 0 12/18/2009 0.1 0 4/9/2010 0.8 0 2/11/2010 0.21 0 12/17/2009 0.1 0 4/8/2010 0.8 5,114 2/10/2010 0.21 0 12/16/2009 0.1 0 4/7/2010 1.15 0 2/9/2010 0.21 0 12/15/2009 0.1 0 4/6/2010 1.15 6,014 2/8/2010 0.21 0 12/14/2009 0.1 0 4/5/2010 1 20,100 2/5/2010 0.21 0 12/11/2009 0.1 0 4/1/2010 0.85 0 2/4/2010 0.21 18,000 12/10/2009 0.1 0 3/31/2010 0.85 0 2/3/2010 0.1 0 12/9/2009 0.1 0 3/30/2010 0.85 0 2/2/2010 0.1 0 12/8/2009 0.1 0 3/29/2010 0.85 0 2/1/2010 0.1 0 12/7/2009 0.1 0 3/26/2010 0.85 0 1/29/2010 0.1 0 12/4/2009 0.1 0 3/25/2010 0.85 1,100 1/28/2010 0.1 0 12/3/2009 0.1 0 3/24/2010 0.85 0 1/27/2010 0.1 0 12/2/2009 0.1 0 3/23/2010 0.85 0 1/26/2010 0.1 0 12/1/2009 0.1 2,000 3/22/2010 0.85 0 1/25/2010 0.1 0 11/30/2009 0.1 0 3/19/2010 0.85 0 1/22/2010 0.1 0 11/27/2009 0.1 0 3/18/2010 0.85 1,500 1/21/2010 0.1 0 11/25/2009 0.1 0 3/17/2010 0.85 0 1/20/2010 0.1 0 11/24/2009 0.1 0 3/16/2010 0.85 0 1/19/2010 0.1 0 11/23/2009 0.1 0 3/15/2010 0.85 0 1/15/2010 0.1 0 11/20/2009 0.1 0 3/12/2010 0.85 3,000 1/14/2010 0.1 0 11/19/2009 0.1 0 3/11/2010 0.85 500 1/13/2010 0.1 0 11/18/2009 0.1 2,000
17 Summary of Trading Activity
On November 18, 2009, ticker SILA traded 2000 shares and the stock price closed at 0.1 on OTC BB. The following 7 trading days there were no trades. On December 1, 2009, ticker SILA traded 2000 shares and the stock price closed at 0.1 on OTC BB. The following 43 trading days there were no trades. On February 4, 2010, 18,000 shares traded and the stock price closed at 0.21 on OTC BB. The following 9 trading days there were no trades. On February 19, 2010, 22,000 shares traded and the stock price closed at 0.21 on OTC BB. The following 10 trading days there were no trades. On March 10, 2010, 22,000 shares traded and the stock price closed at 0.21 on OTC BB. The following 12 out of 16 trading days there were no trades. On the other four trading days, 6100 shares total traded on OTC BB. On April 5, 2010, 20,000 shares traded and the stock price closed at 1.00 on OTC BB. On April 6, 2010, 6,000 shares traded and the stock price closed at 1.15 on OTC BB. The following 13 out of 18 trading days there were no trades. On the other five trading days, 7200 shares total traded on OTC BB.
18 A5 Laboratories Incorporated (AFLB)
Background
On December 23, 2009 a 10K filing was submitted to the SEC under the corporate name of El Palenque Vivero, Inc. The 8k filing submitted to the SEC on April 8 announces the change of corporate name to be A5 Laboratories, Inc. On July 12, 2010 there was a news release that A5 Labs has completed the acquisition of the Contract Research (CRO) and Interferon production technology that was originally announced on May 7, 2010.
Internet Hype of A5 Laboratories Shares
Independent research coverage of A5 Labs was initiated by Emerging Stock Report (July 21), Liberty Analytics (July 29) and Skymark Research (July 30). On July 29, the company shares were also being promoted by a web site known as steriodstocks.com. On July 21, the company shares were also written up by stockguru.com, otctipreporter.com and daytradersdigest.com. Jul 21, 2010
A5 Laboratories Stock Chart
Analysis of Trading Activity
During the 80 day trading period beginning March 9 until July 30, there were 46 days that the shares of A5 Labs did not trade. The average daily trading volume in the shares for the 29 day trading period from March 9 until May 18 was less than 200 shares. Total share volume for the next eight trading days increased to 290,000 shares, an average of 36,200 shares per day. The 23 following days the shares did not trade at all. During the month of July while being the subject of relentless hype, the average daily volume was 61,000 shares.
19 Trading Activity in A5 Laboratories from 03/09/10 – 07/30/10
Date Close Volume Date Close Volume Date Close Volume 7/30/2010 0.88 81,341 6/23/2010 0.75 0 5/14/2010 0.75 0 7/29/2010 0.88 237,511 6/22/2010 0.75 0 5/13/2010 0.75 0 7/28/2010 0.85 156,822 6/21/2010 0.75 0 5/12/2010 0.75 0 7/27/2010 0.85 100,795 6/18/2010 0.75 0 5/11/2010 0.75 0 7/26/2010 0.81 17,975 6/17/2010 0.75 0 5/10/2010 0.75 0 7/23/2010 0.85 48,300 6/16/2010 0.75 0 5/7/2010 0.75 2,500 7/22/2010 0.85 65,051 6/15/2010 0.75 0 4/7/2010 7.5 200 7/21/2010 0.85 69,439 6/14/2010 0.75 0 4/6/2010 1.1 0 7/20/2010 0.88 51,965 6/11/2010 0.75 0 4/5/2010 1.1 0 7/19/2010 0.92 21,803 6/10/2010 0.75 0 4/1/2010 1.1 0 7/16/2010 0.95 74,718 6/9/2010 0.75 0 3/31/2010 1.1 0 7/15/2010 0.92 194,687 6/8/2010 0.75 0 3/30/2010 1.1 0 7/14/2010 0.91 49,901 6/7/2010 0.75 0 3/29/2010 1.1 0 7/13/2010 0.95 31,700 6/4/2010 0.75 0 3/26/2010 1.1 0 7/12/2010 0.86 11,000 6/3/2010 0.75 0 3/25/2010 1.1 0 7/9/2010 0.90 16,000 6/2/2010 0.75 0 3/24/2010 1.1 0 7/8/2010 0.85 8,000 6/1/2010 0.75 0 3/23/2010 1.1 0 7/7/2010 0.75 40,000 5/28/2010 0.75 73,000 3/22/2010 1.1 0 7/6/2010 0.75 52,500 5/27/2010 0.65 57,150 3/19/2010 1.1 0 7/2/2010 0.75 7,500 5/26/2010 0.65 32,000 3/18/2010 1.1 0 7/1/2010 0.75 0 5/25/2010 0.65 10,000 3/17/2010 1.1 0 6/30/2010 0.75 0 5/24/2010 0.65 21,200 3/16/2010 1.1 0 6/29/2010 0.75 0 5/21/2010 0.65 30,000 3/15/2010 1.1 0 6/28/2010 0.75 0 5/20/2010 0.65 32,500 3/12/2010 1.1 0 6/25/2010 0.75 0 5/19/2010 0.65 35,000 3/11/2010 1.1 0 6/24/2010 0.75 0 5/18/2010 0.75 0 3/10/2010 1.1 0 5/17/2010 0.75 0 3/9/2010 1.1 1,000
20 Tuffnell Limited (TUFF)
Background
The original registration statement filed with the SEC was December 31. 2008. At the time of registration Tuffnell Ltd. was incorporated in Carson City, Nevada. Effective March 12, 2010 the corporate address was changed to London in the United Kingdom. There seems to be no company web site. George Dory is listed as President of the company.
Tuffnell Ltd. Stock Chart
Internet Hype of Tuffnell Ltd. Shares
July 7, 2010 - Emerging Stock Report July 8, 2010 – Shamrock Stocks.com July 9, 2010 – stockmarketing.com July 14, 2010 – Shamrock Stocks.com July 16, 2010 – otctipreporter.com
21 Analysis of Trading Activity
The average daily trading volume in the company’s shares from April 5, 2010 until April 21 was 9,000 shares. On April 22, the share volume exploded to 3.2 million shares. The following two trading days the total volume was 1.72 million shares. STOP- Where was the suspicious activity trading report? Despite continuous internet hype during the month of July, the share price fell 30% while the volume remained quite high averaging 286,000 shares per day. The table below shows daily volume and closing price for the shares in the month of April, 2010. It is quite explicit.
Tuffnell Ltd. Trading Activity for April, 2010 in
Date Close Volume 4/30/2010 1.15 210,500 4/29/2010 1.17 121,700 4/28/2010 1.19 124,100 4/27/2010 1.24 208,700 4/26/2010 1.21 1,176,400 4/23/2010 1.1 545,000 4/22/2010 0.95 3,200,600 4/21/2010 0.95 35,000 4/20/2010 0.85 11,000 4/19/2010 0.8 4,200 4/16/2010 0.75 24,000 4/15/2010 0.65 22,800 4/14/2010 0.58 1,800 4/13/2010 0.57 1,800 4/12/2010 0.57 3,000 4/9/2010 0.58 2,000 4/8/2010 0.55 7,000 4/7/2010 0.65 3,000 4/6/2010 0.58 1,500 4/5/2010 0.58 -
22 Brand Neue Corporation (BRNZ)
Background
On June 17, 2008, a registration was filed with the SEC for a company named Qele Resources which was registered in the state of Nevada. During July of 2009, the registration filed with the SEC changed the name of the company to Brand Neue Corp. The company would now be headquartered in Arkansas. April 5, 2010 was the first day of trading for the company under the ticker BRNZ.
Brand Neue Stock Chart
Analysis of Trading Activity
The total share volume for the 29 day period from April 5, 2010 until May 13, 2009 was 15,400 shares per day, an average of 500 shares per day. The shares did not trade a share of stock on 21 out of 29 days. Beginning May 14, 2010 until the end of the month, daily volume rose to 80,000 shares per day while the value of its shares increased by 50% to 0.52(see table pg. 24). By the end of June the value of the shares more than doubled, moving from 0.52 to 1.10 on average daily volume of 192,000 shares.
Internet Hype of Brand Neue Shares
During the month of May, there was only brief mention of Brand Neue. However, on June 1, four different promoters mentioned the shares. They were Shamrock, Steroids, OTC Tip and OTC advisor. The shares were hyped on ten other trading days during the month of June. There were a total 23 different posts hyping the company for the entire month.. On the trading days of June 21 and June 22, there were a total of seven different posts. On June 21, 596,000 shares traded. On June 22, 328,000 shares traded. On June 23, 540,000 shares traded. During this three day period, the shares went from 1.00 (June 18 Close) to a daily high’s of 1.36, 1.58 and 1.71, only to close at 1.00 at the end of trading on June 23.
23 Trading Activity in Brand Neue Shares from April 5, 2010 until August 2, 2010
Date Close Volume Date Close Volume Date Close Volume 8/2/2010 0.97 237,100 6/23/2010 1 540,700 5/13/2010 0.4 - 7/30/2010 0.86 55,700 6/22/2010 1.52 328,200 5/12/2010 0.4 - 7/29/2010 0.87 88,100 6/21/2010 1.3 596,400 5/11/2010 0.4 - 7/28/2010 0.78 112,800 6/18/2010 1 247,300 5/10/2010 0.4 900 7/27/2010 0.83 11,500 6/17/2010 0.89 81,200 5/7/2010 0.17 100 7/26/2010 0.7 9,100 6/16/2010 0.83 272,800 5/6/2010 0.16 - 7/23/2010 0.7 11,000 6/15/2010 0.73 106,900 5/5/2010 0.16 - 7/22/2010 0.7 3,900 6/14/2010 0.7 169,800 5/4/2010 0.16 6,300 7/21/2010 0.7 32,600 6/11/2010 0.6 102,800 5/3/2010 0.4 - 7/20/2010 0.85 57,600 6/10/2010 0.56 100,200 4/30/2010 0.4 - 7/19/2010 0.84 16,700 6/9/2010 0.6 83,800 4/29/2010 0.4 - 7/16/2010 0.75 39,000 6/8/2010 0.63 119,400 4/28/2010 0.4 - 7/15/2010 0.7 45,600 6/7/2010 0.6 73,000 4/27/2010 0.4 200 7/14/2010 0.89 40,000 6/4/2010 0.55 182,600 4/26/2010 0.4 - 7/13/2010 0.87 28,300 6/3/2010 0.55 351,500 4/23/2010 0.4 - 7/12/2010 0.87 32,300 6/2/2010 0.49 146,000 4/22/2010 0.4 - 7/9/2010 0.73 34,400 6/1/2010 0.5 148,000 4/21/2010 0.4 - 7/8/2010 0.58 20,400 5/28/2010 0.52 115,000 4/20/2010 0.4 - 7/7/2010 0.55 42,800 5/27/2010 0.5 71,800 4/19/2010 0.4 - 7/6/2010 0.69 46,600 5/26/2010 0.47 96,600 4/16/2010 0.4 - 7/2/2010 0.73 107,100 5/25/2010 0.46 101,300 4/15/2010 0.4 - 7/1/2010 0.74 111,100 5/24/2010 0.46 75,100 4/14/2010 0.4 300 6/30/2010 1.1 39,100 5/21/2010 0.46 65,000 4/13/2010 0.4 - 6/29/2010 1.13 85,000 5/20/2010 0.45 74,200 4/12/2010 0.4 - 6/28/2010 1.27 104,400 5/19/2010 0.45 151,100 4/9/2010 0.4 200 6/25/2010 1.2 97,200 5/18/2010 0.4 50,000 4/8/2010 0.13 2,200 6/24/2010 1.05 247,800 5/17/2010 0.4 17,200 4/7/2010 0.4 5,200 5/14/2010 0.35 69,000 4/6/2010 0.22 - 4/5/2010 0.22 -
Background of Chief Executive Officer and Chairman Adi Muljo
Mr. Muljo was a director of Verify Smart Corporation (VSMR). The company was eventually exposed as a pump and dump.
24 Guinness Exploration Incorporated (GNXP)
Background
The company was incorporated on July 15, 2005 in the State of Nevada. According to their web site, their auditor is Madsen & Associates located in Murray, Utah, and the transfer agent for their shares is Empire Stock Transfer, located in the Henderson, Nevada. The company web site gives a contact address in Wellington, New Zealand. The primary business “seems” to be mining.
Guinness Exploration Inc. Stock Chart
Analysis of Trading Activity
On March 17, 2009 the company shares began trading under the ticker (GNXP), 10,000 shares traded and the closing price was 0.35. The shares did not trade at all from March 18, 2009 till November 24, 2009. The total share volume for 2009 was 62,100 shares over 201 trading days for an average daily volume of 350 shares.
Beginning on January 4, 2010 until January 15, the stock traded a modest total of 82,000 shares or 8200 shares per day. The average daily volume for the 211 trading days from March 17, 2009 until January 15, 2010 was 720 shares per day. On January 19, 2010 the volume soared to 3.64 million shares. On January 20, 2010 the shares traded 1.17 million shares. The share volume on January 21 was 2.99 million shares, bringing the three day average daily volume to 2.59 million shares. This three day volume surge was 3600 times greater than the volume for the prior 211 trading days on the OTCBB. The following page shows trading activity from January 4, 2010 until January 21, 2010 and a table showing monthly activity from January till July 2010.
25 Trading Activity for Guinness Exploration
Date Close Volume 1/21/2010 0.75 3,643,400 1/20/2010 0.65 1,174,661 1/19/2010 0.61 2,991,330 1/15/2010 0.6 2,500 1/14/2010 0.6 2,500 1/13/2010 0.6 0 1/12/2010 0.6 600 1/11/2010 0.6 2,100 1/8/2010 0.6 2,300 1/7/2010 0.615 60,000 1/6/2010 0.6 7,000 1/5/2010 0.6 2,500 1/4/2010 0.6 2,500
Month Total Average Closing (2010) Volume Daily Price Volume
January 10,111,000 532,000 0.88
February 6,843,000 360,000 1.05
March 4,381,000 194,000 1.01
April 2,507,000 119,000 0.79
May 3,872,000 193,000 0.59
June 798,000 36,200 0.51
July 3,331,000 252,400 0.60
Background of Director John Hiner
John Hiner is also Vice President and Director of Exploration for Lithium Corp. Mr. Hiner has been the President and Chief Executive Officer of Geocom Resources Inc. since April 4, 2003. According to an online profile from Bloomberg Business Week, Mr. Hiner is also secretary and treasurer of Guinness Exploration. (http://investing.businessweek.com/research/stocks/people/person.asp?personId=5424319&ticker=GOC M:US)
26 Conclusion
The current financial crisis has proven how important rigid financial regulation is to the welfare of the nation. Financial fraud has grown to epidemic proportions. It is important to prevent all forms of financial fraud before they spread. Although regulations are in place, many regulators still do not understand complex OTC derivatives --in some cases the people that issue them are uncertain of all the conditions. This hinders the appropriate application of regulations.
The key to opening the door to the sordid world of pump and dump begins and ends at the point of sale. Rigid enforcement of Suspicious Activity Reports, filed promptly by market makers, would allow FINRA and the SEC to pursue these companies suspected of fraud.
This report shows how vulnerable the integrity of the marketplace is to pump and dump fraud. Identification of the problem is the first step in seeking a solution. However, the clear absence of proper regulatory reporting by market makers of suspicious trading activity to FINRA has allowed these multi- million dollar scams to proceed. The cumulative monetary effect of allowing Pump and Dump scams to persist is possibly in the tens of billions.
Many of those involved in these scams are repeat offenders and have had more than one company with suspicious trading activity (see Appendix A). There are promoters that get paid by companies to hype their stock. There is no way to identify if promoters are directly involved with companies or if web sites are being managed by officers of the firms being hyped. However, there are some companies and sites that hype suspicious firms often (see Appendix B).Researching these companies begs the question: do these firms actually exist? They might be the result of creative copy and paste via Microsoft Word. Most of the news releases seem fraudulent or misleading -- designed to propel the subsequent internet hype by the promoters.
The clear solution is for action to be taken. The suspicious trading activity of the eight companies profiled has taken place in the last twelve months. There is no reason why an investigation still cannot to be opened. There is a great need for a strong precedent to be established.
27 Appendix A: Corporate Officers Associated with Multiple Potential Pump and Dump Schemes
Luniel Debeer
Pacific Blue Energy (PBEC)
Tradeshow Marketing Company, Ltd. (TSHO)
28 Johannes T. Peterson
Gold American Mining Corp Background (SILA)
American Sierra Gold Corp. (AMNP)
29
Ado Muljo
Brand Neue Corp.-BRNZ
Very Smart Corp.-VSMR
30 John Hiner
Lithium Corp. - LTUM
Guinness Exploration - GNXP
31 Appendix B: List of Common Internet Companies Promoting and Hyping Stocks Associated with Suspicious Trading Activities www.emergingstockreport.com www.cohenresearch.com www.skymarkresearch.com www.pennyomega.com www.libertyanalyticsco.com www.drstockpick.com www.shamrockstocks.com www.crwewallstreet.com www.steriodstocks.com www.stockprofilers.us www.stockguru.com www.stockmarketing.com www.equitytradingalert.com www.untapped wealth.com www.wallstreetleader.com www.stockprofiler.us www.otcadvisors.com www.stockhunter.us www.otctipreporter.com www.stocksource.us www.stockbrain.net
32