SEC charges penny stock traders for COVID-19 fraud

June 10, 2020

A penny stock trader is facing fraud allegations that could see him slammed by permanent injunctions, civil money penalties, a penny stock bar, and disgorgement with prejudgment interest.

Securities and Exchange Commission (SEC) has filed a complaint in the U.S. District Court for the Northern District of California that charges the trader with violating the anti-fraud provisions of the federal securities laws.

The regulator is accusing the trader of having conducted a fraudulent pump-and-dump scheme in the stock of a biotechnology company by making hundreds of misleading statements in an online investment forum, including a false assertion that the company had developed an approved COVID-19 blood test.

The complaint alleges that the penny stock trader tried to drive the stock price of Arrayit Corporation securities higher from the beginning of March by using online posts encouraging investors to purchase shares, including numerous messages repeating the false assertion regarding an approved coronavirus test.

Additionally, the complaint claims that the trader did so whilst neglecting to tell investors that he owned a large position in Arrayit stock or his plans to sell the shares while others were buying.

The SEC also accused him of having created the fake impression of high demand for the shares by placing and subsequently cancelling several large orders to purchase shares in a tactic known as spoofing.

According to the SEC’s complaint, the trader made approximately $137,000 in six weeks. The SEC temporarily suspended trading in Arrayit securities on April 13, 2020, before the trader was able to profit further from the scheme based on questions regarding the accuracy and adequacy of publicly available information concerning Arrayit, the

“We allege that Nielsen engaged in multiple forms of deception to exploit investors amidst the COVID-19 pandemic,” said Erin E. Schneider, director of the SEC’s San Francisco Regional Office. “Investors should be aware of the potential for stock manipulation, including through claims regarding products or services related to COVID-19.”