Among recent enforcement actions, the Securities and Exchange Commission shut down a $78 million pump-and-dump scheme involving a coffee company with ties to the late reggae great Bob Marley.
In addition, the Financial Industry Regulatory Authority fined Deutsche Bank Securities $1.4 million on short interest reporting failures and fined Signator Investors $450,000 for supervisory failures regarding consolidated reports.
SEC Investigating Pump-and-Dump of Marley Coffee Stock
The SEC charged several individuals in a pump-and-dump scheme involving the stock of the stock of Jammin' Java, a company that operates as Marley Coffee and uses trademarks of late reggae artist Bob Marley to sell coffee products.
According to the agency, Jammin' Java's former CEO Shane Whittle put together the scheme with the aid of three individuals living abroad and the offshore entities they control. Whittle utilized a reverse merger to secretly gain control of millions of Jammin' Java shares, and he spread the stock to the offshore entities controlled by Wayne Weaver of the U.K. and Canada, Michael Sun of India and René Berlinger of Switzerland.
Charged with fraudulently promoting Jammin' Java stock to investors are British twin brothers Alexander and Thomas Hunter, who were previously charged in a separate SEC case for touting multiple penny stocks using a fake stock picking robot. Others charged in the SEC's complaint with pushing the illegal offering through their offshore entities are U.K. citizens Stephen Wheatley and Kevin Miller and Oman resident Mohammed Al-Barwani.
Stock promoter Whittle befriended Rohan Marley — a son of Bob Marley — in Los Angeles. When he learned that Marley had bought a small Jamaican coffee farm, Whittle proposed the creation of a large-scale coffee distribution business built on the Marley name.
To raise capital for the venture, Whittle identified publicly traded shell company Global Electronic Recovery Corp. (GERC), which was a purported waste management business in Los Angeles. He executed a reverse merger between GERC and Marley Coffee, which later became Jammin' Java and trades under the ticker symbol JAMN. In connection with the reverse merger, Whittle secretly gained control of millions of shares that previously had been issued to foreign nominees.
Using his access and control of Jammin' Java and its stock, Whittle and others put together an illegal offering and the fraudulent promotion of Jammin' Java's stock in a pump-and-dump scheme that culminated in the middle of 2011. In anticipation of the promotion, Whittle distributed some of the nominee stock to offshore entities controlled by Weaver, Sun and Berlinger.
To boost the stock price and provide cash to Jammin' Java, Whittle, Weaver, Sun and Berlinger created a fake financing arrangement to make it look as if there were legitimate third-party interest and investment in the company. Jammin' Java's announcement of the financing agreement and other company announcements, along with coordinated trading by entities connected to the scheme, boosted the stock price.
Whittle hid his control of the stock and other aspects of the scheme, lying in beneficial ownership reports that he filed with the SEC. He also distributed another large block of stock to offshore entities, including those controlled or owned by Weaver, Sun, Berlinger, Wheatley, Miller and Al-Barwani. Whittle, Weaver, Sun, and Berlinger hid their beneficial ownership of Jammin' Java stock.
The Hunters published false stock newsletters and took other actions to raise the stock's price; then, when the price was up, the defendants and others coordinating with them dumped 45 million shares on the public market without registering the transactions, making at least $78 million in illicit profits. Weaver, Sun and Berlinger funneled $2.5 million in profits to Jammin' Java under the guise of the phony financing arrangement that launched the promotion.
Jammin' Java's share price and volume began to collapse a few days after the company disclosed on May 9, 2011, that it became aware of an unauthorized and unaffiliated online stock promotion. Disappointing financial results in its annual report took the price down even more.
Marley was not accused of wrongdoing.
