An irreverent Wall Street Blog
by Bill Singer
 
Join BrokeAndBroker blog on Facebook  Follow the BrokeAndBroker blog on Twitter  Connect with BrokeAndBroker on LinkedIn  Join Bill Singer on Google+  Subscribe to RSS Feed

SEC Says That All That Glittered In Guyana Mining Deal Wasn't Gold
Written: December 12, 2011

With all the jitters in the world’s financial markets, precious metals became a very popular investment or, some would say, refuge. Worried investors bought physical bars; ETFs such as GLD, GDX. or SLV; or shares in any number of metal plays such as Goldcorp, Barrick Gold, Newmont Mining, or Silver Wheaton. On the other hand, if you generate enough of a crowd mentality in any particular investment, you’re also going to increase the likelihood of scamsters and con artists flocking to the scene. According to an ongoing case, federal regulators seem to think that’s exactly what happened.

In a Complaint filed on September 18, 2011, the Securities and Exchange Commission (“SEC”) alleged that four defendants had engaged in a market manipulation fraud involving shares of Guyana Gold Corp. (“GYGC”). Securities and Exchange Commission v. Glenn Grossman, Lawrence Steven Cohen, David Schmidt, and John Zanic, (08 Civ. 8078 (DC) (S.D.N.Y.).

NOTE: A Complaint contains allegations and defendants are presumed innocent unless and until proven guilty in a court of law.

GYGC: All That Glitters?

GYGC, Nevada corporation, began trading publicly on February 7, 2008, and is quoted on the Pink Sheets. GYGC’s securities are not registered with the SEC.

GYGC purports to be a development stage company involved in the exploration for gold and minerals. According to an issuer information and disclosure statement that GYGC filed on April 18, 2008, with Pink Sheets, GYGC conducted no operations during the fiscal years ended December 31, 2007, and December 3 1, 2006, and has never generated revenue.

The SEC’s Complaint alleged that the Defendants:

  • Glenn Grossman, 33, Cedarhurst, NY;
  • Lawrence Steven Cohen, 35, Cedarhurst, NY;
  • David Schmidt;
  • John Zanic, Vancouver, British Columbia, Canada,

    who are all characterized as “stock promoters,” engaged in a fraudulent scheme to manipulate the market for GYGC by bribing registered representatives (“RRs”) to purchase GYGC common stock in accounts over which the RRs had trading discretion.

    The Complaint alleges that between April and August, 2008, Individual Arepresented himself to Defendants Grossman, Cohen, and Schmidt as a person who could move stock. More to the point, Individual A claimed to have ties to a group of RRs with discretion over the accounts of wealthy customers.

    On April 17, 2008, Grossman, Cohen, and Schmidt allegedly offered to pay a 30% kickback to Individual A in exchange for his help in putting away some $2-3 million of GYGC common stock. Thereafter, on April 25,2008, Defendant Cohen introduced Individual A to Defendant Zanic, who confirmed the group’s offer of a 30% kickback for purchases of $3 million of GYGC common stock. The parties apparently shook on it.

    As far as this alleged schemes go, if you believe the allegations, this deal is much pretty cut and dried. You got your gold company. You got a start-up venture with no history of operations for two years and no revenue — hey, minor details, right? Add into that mix the lovely nation of Guyana — the land of Jim Jones and Kool-Aid. Also, you have an alleged school of stock promoters circling in the waters, and they propose to work with middlemen Individual A, who, for a fee, is ready to reach out and touch any number of RRs who, also for a fee, are all too happy to work their phones (and sometimes work over their pliable customers) to drum up orders to sell the garbage for which they are going to get a nice wad of cash.

    Oops

    Except, in this particular case, one of the sharks swimming in the waters wasn’t exactly a stock promoter. Think of Individual A as a killer whale. You see, Individual A was an FBI agent. Oops!

    The Dry Run

    The Complaint alleges that Zancic then agreed to do a test transaction with Individual A, one for about $75,000 in GYGC purchases. So much for honor among alleged thieves, I guess. Apparently the stock promoters weren’t quite sure — they wanted to see if Individual A could really move some paper and decided upon a dry run, so to speak.

    During May 1-5, 2008, Defendant Zanic allegedly instructed Individual Ato submit orders to buy GYGC stock, and gave the undercover FBI agent detailed instructions about the size, price and timing of those orders. Further, Zancic allegedly told the agent which market makers to contact for execution. According to the allegations, Zanic issued these instruction so as to ensure that Individual As purchase orders were matched with Zanic’s sell orders at prices Zanic predetermined. Too bad that Zanic didn’t know that Individual A was an undercover FBI agent.

    SIDE BAR: Sometimes customers complain that their broker recommended some stock to them at $5 – you know the patter, it’s going to double or triple in a few weeks, — and the thing plummets to a buck or less. When the customers call to sell their shares, they can’t seem to get the broker on the phone, or he’s in a meeting, or he will call them back. Of course, it’s part of a stall. If the customer persists and threatens, sometimes the broker will try to convince some other pigeon that this stock selling for under a dollar is going to double or triple in weeks and use that order to buy into the stock as a way to cross the complaining customer’s order to sell. Such “No Sell” policies and crossed/matched orders are the stuff of decades of lawsuits and regulatory actions.

    The Complaint alleges that from May 1 to 5, 2008, Individual A caused the purchase of approximately 115,000 GYGC shares worth about $72,000; and, accordingly, the Defendants paid him $14,000, which the SEC characterizes as bribes.

    Shortchanged

    On May 6, 2008, Zanic allegedly wired a partial downpayment of the promised kickback in the amount of only $7,480 to Individual A– who complained about being shortchanged, which prompted the payment of an additional $6,300 from Zanic on July 17th. Defendant Zanic promised to wire the remaining balance.

    All Good Things

    On August 11,2008, Zanic purportedly offered another 30% kickback to Individual A for further GYGC purchases, but the agent did not fulfill his end of that bargain.

    The Defendants are charged with violating Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5. The SEC seeks permanent injunctive relief, disgorgement of ill-gotten gains, if any, plus pre-judgment interest, civil penalties, and a judgment prohibiting Defendants from participating in any offering of penny stock.

    On November 30, 2011, a final judgment by consent was entered against Defendant Glenn Grossman, permanently barring him from participating in penny stock offerings and permanently enjoining him from future violations of Sections 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder.


  •  
    [^top^]

    Previous Entries
    May 23, 2015
    SEC Commissioner Stein Stands Alone In Her Defense Of The Investing Public And IndustryOne, and only one, Securities and Exchange Commissioner got it ... Read On
    May 22, 2015
    One, and only one, Securities and Exchange Commissioner got it right. To her ever-lasting credit and to the shame of her colleagues, Commissioner Kara... Read On
    May 21, 2015
    Yesterday, I tried to predict the future. A few hours before the United States Department of Justice announced its settlement with JPMorgan Chase, Cit... Read On
    May 20, 2015
    It is now 8:30 a.m. EDT on May 20, 2015 and I am posting this BrokeAndBroker.com Blog without much enthusiasm – I think the fancy French word for ho... Read On
    May 19, 2015
    Stockbroker, Compliance, Legal, and Regulatory JobsEmployment PageBrokeAndBroker.com Jobs#wallstreetjobs@brokeandbrokerNOTICE TO EMPLOYERS: BrokeAndBr... Read On
    May 18, 2015
    The United State Court of Appeals for the Ninth Circuit ("9Cir") affirmed the Central District of California's ("CDCA's") judgment in a clas... Read On
    May 18, 2015
    There comes a point in a registered representative's career when it may simply be time to move on. For many reps who decide to relocate, the questions... Read On
    BrokeAndBroker.com Job Search


    Related Topics
    Tag Cloud
    Internet FINRA Bear Stearns Bloomberg SEC NASD NYSE Money Laundering Due Diligence Waiver Forbes China Broy Woody Allen Madoff NAC NPR Marketplace Stanford UBS Ketchum Antitrust NASDAQ RRBDLAW Schapiro Bill Singer BrokerAndBroker USERRA Brokeandbroker.com Morgan Keegan Arbitration Counterclaim BrokeAndBroker.com Khuzami BrokeAndBroker Aleynikov Goldman Sachs brokeandbroker Promissory Note U4 Bill SInger EFL CFTC Huffington Post Flash Crash arbitration RBC RRBDLAW.com Ponzi Affinity Fraud Wachovia Criminal Raymond James BrokeandBroker.com Expungement Fraud Securities Fraud Outside Business Activity Registered Rep Magazine FOREX BrokerAndBroker.com FBI Banc of America Pro Se PCAOB Supreme Court Morgan Stanley Smith Barney E*Trade Margin email Galleon Penson U5 Defamation Protocol Wells Fargo Punitive Damages Citigroup Merrill Lynch ARS Employee Forgivable Loan Street Legal Morgan Stanley AWC Fidelity Bankruptcy Broke And Broker HFT David Sobel Day Trading Ameriprise Commissions Spouse Schwab Commission CRD Kenneth Starr IRS CNBC Complaint ATM Skimming Hacking Phishing Malware Naskovets Poteroba Koval Lincoln Financial Selling Away Outside Business Activities Rakoff 2nd Circuit Second Circuit IRA 401k Forgery Tax RRBDlaw.com Email Netschi Moore Whistleblower Street Sweeper Countrywide Tran Bharara Facebook Online Severance Bonus Eligibility Rule TD Ameritrade Hedge Fund SAC 1099 Smith Barney Lehman Brothers SIPC IC3 Scottrade Lehman JPMorgan Chase Hertz Insider Trading Bank of America Department of Justice Elles Bribe Auction Rate Securities Raiding Spam Edward Jones Medicare Diabetes Dow Schumer Thain Walter Bid Rigging Real Estate Discrimination Wall Street Statutory Disqualification Form U4 Form U5 Indictment Boyland DOJ Corruption bill singer FTC Do Not Call FINRA Arbitration Costa Rica Settlement LIBOR Varney Plea Rule 8210 Eligibility RRBDlaw 8210 Appeal Fowler LPL Johnson Cellphone US Airways JPM BrokeandBroker Reg D MSSB Vault Loan SunTrust Discovery Employment Rosenthal Recruiting Lawyer Trading Platform JP Morgan Employment Tuesday Wrongful Termination Bank Guarantee WaMu Solicitation REIT Martin Credit Cards Rule 3050 Away Account Credit Repair PN Advisor Placement Group Fifth Amendment Forex Mortgage Private Placement Moon CGMI Failure to Supervise Merrill Anderson Exam Lee Borrowing Tax Lien Conversion Oppenheimer Wedbush Felony Misdemeanor Expenses ING Lien OTR Estate Jobs Florida Credit Card Elderly Flash Drive Annuity Expense Reimbursement FNMA BrokeAndBroke TIC DWI Promissory Notes Suitability Will POA Power of Attorney Casino NSF MF Global Counterfeit Preet Bharara Corzine Hacker Deferred Compensation RIA Prison Disclosure NASAA Aguilar FCPA Subway Testimony Identity Theft Gold Dell Bar Injunction Bank Deutsche Bank Hospital Due Process God HSBC Private Placements Eric Stein Wire Fraud FINOP CCO Compliance Audit Joshua Brown Backstage Wall Street Obstruction of Justice Reuters Retaliation Variable Annuity Arbitraiton Outside Account Options Telephone Wine Series 7 Social Media ADA Pacifico Non-Prosecution Agreement Confirm Tax Fraud Retirement OBA Equity Indexed Annuities EIA Disability MetLife Continuing Education Cheating OIP Tax Liens Willful CE Unregistered Impersonation Annuities BBVA Business Expenses ETF JOBS Act Mail Fraud Parking Variable Annuities Signatures BitTorrent Impersonator Wire Transfer Wire Crowdfunding Nasdaq Away Accounts WSP Laptop Dodd Frank Checks RMBS AML PST Solicited Unsolicited Congress SRO Password Wife Discretion Non-Solicitation Restaurant Commodities Private Securities Transaction Offer of Settlement Money Market employment jobs Great Recession Chase Investment Services Arrest Barclays Liens Failure To Supervise Apple Time And Price T&P Willfully Husband Letter of Authorization LOA Sexism Debit Card Knight Test Practice Sale Unfair Competition Signature Judgments Undisclosed Settlement Trainee Fee Trust Laser Side Bar Mattera Female Sales Assistant Kennedy Charge Sexist NML Argentina Embezzlement Silver Investor Alert Evidence Judgment Bank Fraud Deceased Bill Singer BrokeAndBroker TSSB OHO Leveraged ETF Mary Jo White Trustee Motion To Dismiss Frumento Conspiracy 6th Circuit Proctor Commissioner Stein Rule 3040 Customer Files Class Action Beneficiary NYAG Schneiderman 11th Circuit Insurance Gallagher White Self Regulation Short Sale Compromise Website Rule 2010 Check TRO Supervision Vacatur Remand SDNY Rule 12206 BrokeAndBroker Bill Singer Piwowar Stifel Rule 1122 Article V signature Confidential Inside Information Reg SP VA Regulation SP Fees Cease And Desist Customer Rule 3270 Rule 3240 Annual Compliance Questionnaire OWB 2Cir Red Flags Payroll Stockbrokers ALJ Cybercrime Loans BrokerCheck Altered Records
     
    Email Bill Singer Connect with Bill Singer on Facebook Follow Bill Singer on Twitter Link up with Bill Singer on LinkedIn Join Bill Singer on Google+