The Securities and Exchange Commission Tuesday charged four promoters with ties to the Pacific Northwest for manipulating the securities of several microcap companies, including marijuana-related stocks of GrowLife Inc. and Hemp Inc.
The SEC alleges that the four promoters bought inexpensive shares of thinly traded penny stock companies on the open market and conducted prearranged, manipulative matched orders and wash trades to create the illusion of an active market in these stocks.
They then sold their shares in coordination with aggressive promotional campaigns that urged investors to buy the stocks because the prices were on the verge of rising substantially, the SEC said in a Tuesday statement. "However, these companies had little to no business operations at the time. The promoters reaped more than $2.5 million in illegal profits through their schemes."
Two of the companies manipulated in this case — GrowLife Inc. and Hemp Inc. — claim to be related to the medical marijuana industry.
In mid-May, the SEC suspended trading in GrowLife and Hemp Inc., and warned investors in an alert about the potential for fraud in microcap companies that claim their operations relate to the marijuana industry.
Other schemes by the four promoters involved an oil-and-gas company — Riverdale Oil and Gas Corp. — and three other microcap stocks, ISM International, Allied Products Corp. and Aden Solutions.
The SEC's "Microcap Fraud Task Force is taking direct aim at abusive practices and serial violators within the microcap markets like these four promoters seeking to exploit retail investors for personal gain," said Michael Paley, co-chairman of the task force, in a statement. "In this case, we meticulously reviewed trading records and developed the evidence necessary to connect these four promoters and their coordinated trading efforts."
The SEC's complaint filed in federal court in Tacoma, Washington, charges the following individuals:
- Mikhail Galas, a stock promoter who lives in Vancouver, Washington.
- Alexander Hawatmeh, a member of Worthmore Investments LLC, which owns a stock promotion website called stockhaven.com. He formerly lived in Vancouver and currently resides in Lincoln City, Oregon.
- Christopher Mrowca, a stock promoter who operates Money Runners Group LLC, which has an affiliated stock promotion website called MoneyRunnersGroup.com. He lives in Bradenton, Fla.
- Tovy Pustovit, who owns a stock promotion website called Explosive Alerts. He also lives in Vancouver.
In a parallel action, the U.S. Attorney's Office for the Western District of Washington announced criminal charges against Galas, Hawatmeh and Mrowca.
