[C]harged the CEO of a sexual health products retailer and a paid promoter with orchestrating fraudulent promotional campaigns to tout the company's stock.
1. From approximately September 2011, Fraser-the CEO of the penny stock issuer Empowered Products, Inc. ("EMPO")-concealed from the investing public his and EMPO's involvement with and funding of at least three separate promotional campaigns touting EMPO.2. As part of the first promotional campaign in September and October 2011, Fraser, who was also the writer and publisher of stock-picking newsletters, and Contrarian Press, Fraser's publishing company, made materially false and misleading statements about their relationship with EMPO. 3. Fraser and Contrarian Press touted EMPO's business prospects and repeatedly recommended-in e-mails and/or hard-copy mailers-the purchase of EMPO shares. Specifically, Fraser and Contrarian Press authored and distributed highly-positive articles about EMPO's business without disclosing in those articles that (a) EMPO's CEO Fraser prepared and distributed the articles and owned and ran Contrarian Press; and (b) EMPO and Contrarian Press had entered into an "Investor Relations / Sales and Marketing Agreement" ("Investor Relations Agreement"), under which EMPO paid thousands of dollars per month to Contrarian Press, in part, to promote its business and stock. As a result, the promotional campaign fraudulently hid the fact that it was, in essence, sponsored by the EMPO, the very company the promotional articles were recommending.4. In order to make this promotional campaign more effective, Fraser and Contrarian Press worded the promotional articles to create the false appearance of objectivity in reporting on EMPO's prospects. For example, Fraser wrote a number of the promotional articles under an alias, "Charlie Buck." These promotional articles failed to disclose that Fraser was both EMPO's CEO and the promoter hiding behind the alias of "Charlie Buck", and drafted to create the false and misleading appearance that the author was an objective third-party, unconnected to EMPO and Fraser, who was strongly recommending the purchase of EMPO stock. For example, (a) when using the "Charlie Buck" alias as the author of articles, Fraser referred to EMPO's CEO (himself) in the third person; and (b) the articles explicitly disclaimed Contrarian Press's receipt of payments from EMPO, despite the monthly payments made under the Investor Relations Agreement. 5. As part of the second and third promotional campaigns-which ran in May 2012 and October through mid-November 2012, respectively-Fraser and Contrarian Press hired third parties, including Yeung, to arrange the promotion of EMPO and its stock in order to further obscure Contrarian Press's and Fraser's direction of the promotional campaigns. For example, from approximately summer through fall 2012, Yeung-working under the alias "Mason Zhang" and through a front company, "Crown Pacifica Media Services"-arranged a promotional campaign for EMPO's stock. Although Yeung worked at Fraser's direction and under his control, the promotional materials did not disclose Fraser's and Contrarian Press's involvement in the campaign and the fact that EMPO was paying Contrarian Press to promote its business and stock. 6. As a result of Defendants' fraud, the investing public was misled both (a) as to the objectivity of the promotional material, specifically, that the promotional campaigns were arranged by EMPO's CEO; and (b) that EMPO paid for Contrarian Press to promote its stock.7. Defendants' efforts to promote EMPO's stock were successful. During each of the promotional campaigns, EMPO's stock volume and/or price increased substantially.
17. Empowered Products, Inc., is a Nevada corporation with its principal offices in Las Vegas, Nevada. EMPO described itself as a manufacturer of gels and other "sexual health" products.
27. Shortly after entering into the Investor Relations Agreement-and true to its agreement to attempt to expand EMPO's shareholder base-Contrarian Press began touting EMPO's stock in promotional newsletters. However, in order to create the false and misleading appearance of objectivity, the Contrarian Press promotional materials, as drafted by Fraser, masqueraded as objective and independent stock picking newsletters, with no disclosure of Fraser's involvement with Contrarian Press, or that Fraser was, in fact, "Charlie Buck," the supposedly independent stock analyst-author of Contrarian Press newsletters that so highly touted the prospects of EMPO.28. For example, on September 9, 2011, Contrarian Press issued a newsletter called the "Stock-Profit Guide," which stated that "Empowered Products (EMPO) represents a solid growth stock that just launched at $1.25 per share." This newsletter purported to be written by "Charlie Buck." "Charlie Buck" was a pseudonym for Fraser, who was the true author of the Stock Profit Guide. In authoring the Stock Profit Guide, Fraser took additional steps to create the appearance that neither he nor EMPO were involved in its preparation. For example, Fraser phrased the newsletter as an objective evaluation of EMPO, for example by discussing himself in the third person, to create the false impression that Charlie Buck was an objective third party:
What I am impressed with most at this early stage is the company's global sales reach and expanding revenue/growth model. I also love that Empowered Products is a U.S. corporation operating in America, employing American workers, and manufacturing its production on U.S. soil . . . . According to the company, Empowered has obtained over 85 trademarks for its products worldwide. And, over the last five operational years, EMPO has reported a steady increase in the operational capacity/efficiency of its Las Vegas, Nevada, bottling facility . . . .I have known the founder, president, and CEO of Empowered Products, Scott Fraser, for many years and I've watched the company grow from a small, private entity nine years ago to a rapidly emerging publicly traded corporation today.