SEC Charges Las Vegas Prime Star Group in Penny Stock Pump and Dump Investment Scheme
The SEC filed charges this week against Las Vegas-based Prime Star Group, Inc. and its CEO, Roger Mohlman, for allegedly conducting a fraudulent pump-and-dump investment scheme to sell unregistered shares of Prime Star’s stock to unsuspecting investors. The SEC alleges that Molhman and Prime Star ran the scheme from 2009 through at least March 2010.
According to the Complaint, “Molhman pumped up the price of Prime Star’s stock by disseminating false and misleading press releases regarding, among other things, lucrative agreements for the company’s food and beverage products.” One such press release, issued in March 2010, claimed the company had entered into a distribution agreement valued at $16 million per year. In reality, alleged the SEC in the Complaint, Prime Star “had no revenues and no real prospects of revenue.”
The fraudulent press releases allegedly caused a marked – but temporary – increase in Prime Star’s stock. “For instance, on March 16, a prior day press release caused trading volume to spike to more than 16 million shares, which was 10 times more than the previous day’s trading volume. Prime Star’s stock price plummeted the following day,” wrote the SEC in aMarch 7 release. Molhman and Prime Star are accused of illegally distributing 18 million unregistered shares to consultants.
The consultants, also named as defendants in the suit, then allegedly sold the shares to investors for approximately $1.2 million. The shares were issued using “backdated consulting agreements and forged attorney opinion letters,” according to Eric I. Bustillo, Director of the SEC’s Miami Regional Office. Trading in Prime Star was suspended in June 2011, due to SEC concerns over the adequacy and accuracy of information distributed by the company.
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