SEC Obtains Asset Freeze in Microcap Pump and Dump Scheme Targeting Elderly Retail Investors

The Securities and Exchange Commission today announced an emergency action charging two individuals with running a pump and dump scheme targeting retail investors. The SEC also obtained an emergency court order freezing the defendants’ assets.

According to the SEC’s complaint, Florida resident Garrett M. O’Rourke and Maryland resident Michael J. Black worked together between 2016 and 2018 to fraudulently sell the stock of several microcap companies to investors, including elderly retail investors, using high pressure stock promotional campaigns. The SEC alleges that, as part of the scheme, O’Rourke aggressively touted the companies to prospective investors through unsolicited cold calls during which he repeatedly lied about his association with legitimate financial institutions and the prospects of the microcap companies. According to the complaint, O’Rourke also told prospective investors that he had their best interests in mind and that he had found promising investment opportunities for them. In actuality, however, O’Rourke was calling them to convince them to buy the stocks so that he and Black could sell their holdings in the same stocks for a profit. O’Rourke and Black also allegedly schemed to disguise their control over at least one of the microcap companies, EnviroTechnologies International, Inc., in order to facilitate their illegal sales of the company’s stock in the public securities market, generating millions of dollars in proceeds.

“The SEC continues to aggressively pursue microcap fraud, an ongoing source of harm to retail investors,” said John T. Dugan, Associate Director of Enforcement in the SEC’s Boston Regional Office. “Investors should beware of parties using the types of sales techniques alleged in our complaint, including unsolicited calls and high-pressure sales tactics.”

“We were able to halt O’Rourke’s and Black’s scheme and freeze their assets despite their elaborate attempts to conceal their conduct using overseas trading platforms and a fictitious name,” said Lara Shalov Mehraban, Associate Regional Director of Enforcement in the SEC’s New York Regional Office.

The SEC’s complaint, filed on July 17, 2019, in U.S. District Court for the Eastern District of New York, charges Black and O’Rourke with violating the antifraud and registration provisions of the federal securities laws. In addition to the asset freeze and other temporary relief obtained, the SEC is seeking permanent injunctions, return of allegedly ill-gotten gains with prejudgment interest, civil penalties, and penny stock bars.

In a parallel criminal case, the U.S. Attorney’s Office for the Eastern District of New York today announced criminal charges against O’Rourke.

Investors can find additional information about pump-and-dump scams, including the warning signs of fraud, on Investor.gov. The Office of Investor Education and Advocacy and Division of Enforcement’s Retail Strategy Task Force have also issued Investor Alerts about these types of fraud, including Investor Alert:  Fraudulent Stock PromotionsInvestor Alert: Don’t Invite Investment Scams to Find You, and Investor Alert: Beware of Stock Recommendations on Investment Research Websites.

The SEC’s investigation was conducted by Trevor Donelan, Eric Forni, Kathy Shields, and Amy Gwiazda of the Boston Regional Office, and Rhonda Jung, Melissa Coppola, and Sandeep Satwalekar of the New York Regional Office. The SEC appreciates the assistance of the U.S. Attorney’s Offices for the Eastern District of New York and District of Massachusetts, the Federal Bureau of Investigation, the Royal Canadian Mounted Police, the British Columbia Securities Commission, the Malta Financial Services Authority, the Mauritius Financial Services Commission, the Hong Kong Securities and Futures Commission, the Monetary Authority of Singapore, and the Financial Industry Regulatory Authority.

SEC Press Release

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from The Securities Law Home Page – SECLaw.com