June 22, 2021

Fake SEC Filings Take Pump & Dump To Next Level

You know we love “fake SEC filings” around here – and this CNBC article recaps quite the scheme. Allegedly, a group of scammers scooped up shares from dormant shells that were still trading sporadically on the OTC. After using fake resignation letters and statements to reinstate the companies’ state corporate registrations and get the companies’ EDGAR codes, they filed 8-Ks to say that they were the new execs/directors, issued press releases about completely fabricated deals, and dumped the stock at an inflated price. Yesterday, the SEC announced that it had filed a complaint against the apparent ringleader.

Although I’m somewhat impressed and flattered that these folks would take the time to understand the mechanics of EDGAR and Secretary of State filings, I’m left thinking that these steps turned the pump & dump into an extra well-documented crime. They used their real names in the filings!

I’m also a little disappointed. If the alleged scammers were trying to appear legitimate, they should’ve gone all the way and made the other required filings, like the press releases and periodic reports. Maybe these filings were made and have since been removed – but if not, I’d like to know whether it was the time & effort that held them back from doing that, or if they simply decided that more securities fraud was a bridge too far.

While I’m nit-picking, here’s another suggestion for improvement: at least some of the companies also had suspended their Exchange Act filing obligations many years in advance of the Item 5.02 filing. It’s suspicious to drop a new Form 8-K out of nowhere. What legitimacy was gained from all this work?

I’m definitely not giving crime advice here, and I’m too risk averse to understand the appeal of any of this – especially for a mere $100k in trading profits! But what I’ve learned today is that it’s probably better to just stick to message boards and social media for your pump & dump.

Liz Dunshee