The Securities and Exchange Commission charged four promoters on Tuesday with manipulating the stock of several microcap companies, including one marijuana-related business in which the SEC had recently halted trading.
The promoters allegedly bought shares of thinly traded penny stock companies with little-to-no business and conducted “pre-arranged, manipulative matched orders and wash trades to create the illusion of an active market,” according to the SEC’s press release. Then, like a typical pump and dump, they allegedly sold their shares alongside aggressive promotional campaigns — reaping more than $US2.5 million in “illegal profits,” according to the SEC.
These efforts allegedly led to the manipulation of two companies with ties to the legal marijuana industry: GrowLife Inc., a hydroponics providers, and Hemp Inc., the parent company of a variety of cannabis-related endeavours. Back in mid-May, the SEC issued a blanket caveat emptor on marijuana-related stocks after already having suspended trading in five companies, including GrowLife. The organisation noted the latest industries often attract greater opportunities for fraud.
Christopher Mrowca, who runs MoneyRunnersGroup.com, specifically promoted GrowLife, predicting the stock would nearly double, according to the SEC. At the same time, he “engaged in manipulative trading designed to increase the price and volume” of the stock, the SEC’s complaint claims.
The other promoters include: Mikhail Galas; Alexander Hawatmeh, affiliated with stockhaven.com; and Tovy Pustovit, who owns a website called Explosive Alerts. All four live in the Pacifist Northwest, an area recently booming for legal marijuana.
The U.S. Attorney’s Office for the Western District of Washington also announced criminal charges against all the promoters, except Pustovit.
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