April 11, 2019 Comments (0) Blog, Current Investigations, Securities Fraud

Fraudulent Microcap Manipulation Scheme

Fraudulent Microcap Manipulation Scheme, Featured by Top Securities Fraud Attorneys, The White Law Group

Environmental Packaging Technologies Holdings, CURE Pharmaceutical Holding Corp. Microcap Stock Investigation

According to a press announcement in November 2018, the Securities and Exchange Commission charged four individuals for their roles in a scheme to profit from the manipulation and illegal sale of  microcap stock of two publicly traded companies, Environmental Packaging Technologies Holdings, Inc. and CURE Pharmaceutical Holding Corp.

According to the SEC’s complaint, a California resident, worked with three others to facilitate this scheme. The defendents allegedly hid  ownership and control over the companies by using offshore entities to hold his stock and by establishing accounts to sell that stock at Wintercap SA, a Swiss-based company.

On October 2, 2018, the SEC filed an emergency action and obtained an asset freeze against one individual and Wintercap, charging them with a scheme that generated more than $165 million of illegal sales of stock in at least 50 microcap companies.

According to the SEC’s complaint, to maximize profits from the alleged scheme, the defendants arranged to pay a stock promoter to praise the stock of Environmental Packaging while creating the impression that the recommendation came from a neutral third party.

During the promotional campaign, Environmental Packaging shares more than doubled, from approximately $1.05 per share to $2.21 per share. The defendents allegedly planned to collect a percentage of the proceeds from the unlawful sales.

According to the complaint, after the SEC halted trading in the securities of Environmental Packaging on June 27, 2017, the defendants purportedly attempted to obstruct the SEC’s investigation and hide their own involvement in the matter.

The SEC seeks a permanent injunction against future violations, disgorgement of allegedly ill-gotten gains plus prejudgment interest, penny stock bars, and monetary penalties.

Investigating Potential Lawsuits

The White Law Group is investigating potential securities fraud claims involving broker dealers who may have unsuitably recommended high risk microcap stocks to investors.

According to the SEC, the term “microcap stock” (also known as “penny stock”) applies to companies with low or micro market capitalizations.  Companies with a market capitalization of less than $250 or $300 million are often called “microcap stocks” – although many have market capitalizations of far less than those amounts.

Microcap stocks are high risk investments.  Many microcap companies are new and have no proven track record.  Some of these companies have no assets, operations, or revenues.  Others have products and services that are still in development or have yet to be tested in the market.  Another risk that pertains to microcap stocks involves the low volumes of trades, which may make it difficult for you to sell your shares when you want to do so.

Additionally, it may be difficult to find reliable publicly-available information about the company.  Most large public companies file reports with the SEC that any investor can get for free from the SEC’s website. That is not the case with microcap stocks.

Further, non-listed corporations don’t have to meet any minimum listing standards, but are typically subject to some initial and ongoing requirements unlike companies that list their stocks on exchanges and must meet minimum listing standards.

Broker dealers are required to perform adequate due diligence on all investment recommendations. They must ensure that each investment recommendation that is made is suitable for the investor in light of the investor’s age, risk tolerance, net worth, financial needs, and investment experience.

A broker or brokerage firm can be held liable if they make an unsuitable investment recommendation or fail to adequately disclose the risks. The Financial Industry Regulatory Authority (FINRA) provides an arbitration forum for investors to resolve such disputes.

The White Law Group, LLC is a national securities fraud, securities arbitration, investor protection, and securities regulation/compliance law firm with offices in Chicago, Illinois and Franklin, Tennessee.

We represent investors in FINRA arbitration claims in all 50 states. Our attorneys have recovered millions of dollars from many brokerage firms in the past.

If you have suffered investment losses in Environmental Packaging Technologies Holdings, Inc. and CURE Pharmaceutical Holding Corp. or another microcap stock, you may be able to recover your losses.  Please call the securities fraud attorneys at The White Law Group at 888-637-5510 for a free consultation.

For more information on The White Law Group, and its representation of investors, please visit www.WhiteSecuritiesLaw.com.

Click here for your FREE consultation.
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