In a civil complaint filed by the US Securities and Exchange Commission, the regulator has named John Babikian as the mastermind behind one of the largest penny-stock websites known.
Financial Post said that the Bugatti-driving Montreal native operated AwesomePennyStocks to build up the stock of a coal company while dumping his own shares in the process, SEC said. Data compiled by Bloomberg revealed that Babikian orchestrated a scheme which entailed sending messages about the firm and 38 others over a five-year span. The data also revealed that the scheme helped boost the coal company's market value up to $3 billion.
Financial Post said that since the 1990s, bulk emails had been used as it was considered the most effective at increasing the hype of less-known companies. Because of AwesomePennyStocks, a prescription-drug distributor's value increased to over $700 million within a two-month-span in 2012. Financial Post said the shares of the drug distributor had collapsed when messages stopped being sent.
SEC's former chief of market intelligence, Tom Sporkin, commented after viewing the data Bloomberg News shared, saying, "Compared to the ones I ran into, that's big. It's the biggest one I've heard of. It's what I call the street crime of securities. The world of pump-and-dumps occurs in the shadows."
Financial Post said that although stock promotion is legal, the current securities law in the US prohibits entities and individuals to manipulate the market.
Babikian, said SEC, left Canada two years ago in the middle of tax-evasion allegations. According to his estranged wife's lawyer, Anne-France Goldwater, Babikian is in Monaco.
Revenue Quebec documents revealed that Babikian owned a Bugatti Veyron, which retails over $1 million and hit 60 miles per hour in 2.5 seconds. The provincial tax regulator was able to obtain an order to seize some of his assets last year after claiming Babikian owed Revenue Quebec $4.6 million in unpaid taxes, Financial Post said.
