The popularity of the movie “Wolf of Wall Street,” which highlights a fraudulent “penny” stock sales operation, might have rubbed someone at the Securities and Exchange Commission (SEC) the wrong way.


SEC: Unearthing penny stock schemes

The SEC announced today a new crackdown to “unearth penny stock schemes with roots in South Florida,” a statement said today.  Charges were also filed against a Brooklyn, NY individual.

The SEC handed down charges against five brokerage-related firms, promoters of penny stocks, for “conducting various manipulation schemes involving undisclosed payments to induce purchases of a micro-cap stock to generate the false appearance of market interest.”  The Wolf of Wall Street is a tale about a penny stock brokerage company that manipulated the price of the stock by controlling the volume and then sold unsuspecting but greedy average Americans a pipe dream too good to be true – which turned out to be the case.

Penny stock promoters “employing a menu of schemes, tricks and deceits”

“These stock promoters employed a menu of schemes, tricks, and deceits in their pursuit of unearned money at the expense of other investors,” said Eric I. Bustillo, director of the SEC’s Miami Regional Office.  “Their bold misconduct highlights the continuing need for law enforcement action to aggressively root out microcap fraud.”  Other cases of market manipulation include charges that Libor interest rates and currency markets, but the tactics are not targeted to defraud individual investors.

Today’s charges bring to 48 the number of individuals charged in the South Florida investigation, along with 25 companies.

The SEC investigation, which was announced October 2010, claims that Kevin McKnight and Stephen C. Bauer of Boca Raton, Fla.-penny stock marketers, manipulated the market in Environmental Infrastructure Holdings Corp. (EIHC) by giving the appearance of artificial buying interest.  Also charged in separate actions were Jeffrey M. Berkowitz of Jupiter, Fla.; Eric S. Brown of Brooklyn, N.Y.; and Boca Raton, Fla.-based Richard A. Altomare.

As these stock promoters face punishment, “The Wolf of Wall Street” is on track to make the movie’s star, Jordan Belfort, more money than he ever made as a fraudulent penny stock promoter.  “Greed is not good,” he recently recanted.