A Virginia man has been sued by the SEC for allegedly manipulating trading in at least 97 microcap stocks for years, and the agency said investors should take notice.
“Microcap investors should know that sometimes market volume in a particular stock can be driven by a single fraudulent actor, as alleged here,” said Paul Levenson, director of the SEC’s Boston Regional Office, in a prepared statement.
The Securities and Exchange Commission on Wednesday filed a complaint in U.S. District Court in Massachusetts charging a self-described penny stock promoter and his company with fraudulently reaping $3.3 million in income from buyers who thought they were paying for promotional e-mails for microcap stocks.
Unbeknownst to the buyers, what they got instead were three years’ worth of manipulative stock trades designed to drive up the stocks' trading volume, the SEC said.
Eric Landis, 53, of Charlottesville, Va., was sued by the SEC for allegedly lying to third-party media buyers for microcap companies, falsely telling them he would distribute promotional materials for the stocks via e-mail lists with tens of thousands of subscribers.
Landis actually had no lists with that number of e-mail addresses, and instead used multiple brokerage accounts to trade in the microcap stocks from 2015 to 2018, significantly increasing trading volume to create the illusion that his promotions were getting investors interested in the stocks, according to the SEC.
Landis was paid about $3.3 million during the period by media buyers who thought they were getting promotions in return, the SEC said, adding that such promotions are a common strategy to drum up interest in lightly traded microcap stocks.
In 2004, Landis settled a prior enforcement action brought by the SEC for his role in a market manipulation scheme, and he pleaded guilty in a related criminal case to a felony count for obstructing justice, the SEC noted.
"Landis traded thousands of microcap shares himself using brokerage accounts in his own name, in the name of an entity he controlled, Ridgeview Capital Partners LLC, and in the names of several third parties," the SEC alleged in a press release.
The trades included about 1,300 “matched trades” that involved simultaneously selling and buying stocks in the microcap companies he was paid to promote.