Penny Stock Promoter Settles SEC Charges for Hiding Profits from Hyped Shares

Jack Humphrey, Regulatory journalist
January 14, 2011 /

A penny stock promoter from Victor, New York has agreed to settle charges of the Securities and Exchange Commission (SEC) for violating the federal securities law when he and his website failed to disclose to investors profits gained from promoting hyped stocks unloaded from his own account.

Christopher Wheeler who owns OTCStockExchange.com allegedly hid the amounts paid to him by certain issuers to promote their stock while at the same time liquidating millions of his own shares for profits amounting to more than $2.95 million.

From 2007 to 2008, the penny stock promoter had been receiving undisclosed payments several times for promoting “thinly-traded penny stock” on OTCStockExchange.com which the website professed to be a compilation of a “long list of successful stock picks,” the SEC claimed. After the issuers tendered the undisclosed payments to the penny stock promoter, the SEC continued, their stocks were posted on the website with “lofty price predictions for the stock without any reasonable basis for those projections” while investors were also asked to purchase the securities with hyped prices.

Volumes of shares traded and the price of securities then increased temporarily as a result of the penny stock promotion, giving Wheeler the opportunity at the time to unload his personal shares to the market.

“The securities laws require stock promoters to disclose their compensation so that investors can make informed decisions about the credibility of the information they are being provided,” Director of the SEC’s New York Regional Office George Canellos said.

The traded securities in question belonged to Infinity Medical Group, Inc., Solei Systems, Inc., Cannon Exploration Inc., and China Jiangsu Golden Horse Steel Ball Inc. (which now operates as Santana Mining, Inc.), from which the penny stock promoter raked $450,000 of illegal profits that he transferred to his own company, North Coast Advisors, LLC, which was named as relief defendant in the lawsuit.

In addition to financial penalties, the SEC’s complaint sought to bar Wheeler and his website from offering penny stock in the future.

 

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