MIAMI (CN) – The SEC says a crooked manager of an unregistered penny stock promoter made $169,000 from a telemarketing scam.
The SEC sued First Resource Group LLC and David H. Stern, in Federal Court.
Stern, 48, of Tamarac, Fla., was sole manager of Fort Lauderdale-based First Resource, the SEC says.
It claims Stern and his company “fraudulently touted the stock of two thinly traded microcap companies, sold each company’s stock at the same time they were touting it, and manipulated the market for each stock.”
It was a standard telemarketing stock scheme, according to the complaint: “First Resource signed contracts with two stock promoters agreeing to solicit investors to buy stock of TrinityCare Senior Living, Inc. and Cytta Corporation. Pursuant to these contracts, First Resource received shares of each company’s stock as compensation for soliciting investors. Stem and First Resource used telemarketers to contact investors. The investors solicited by the telemarketers were registered representatives at broker-dealers. While the First Resource telemarketers were recommending to these investors that they purchase TrinityCare and Cytta stock, Stem was selling First Resource’s shares of the two stocks. Neither Stem nor First Resources disclosed First Resource’s stock sales to the investors being solicited.
“Further, Stem also manipulated the markets for TrinityCare and Cytta’s stock. He purchased small amounts of each stock at prices above the market to raise the market price and create the false appearance of legitimate trading activity. The manipulation was designed to induce investors to purchase the stocks. Stem took advantage of the manipulated stock prices and sold large amounts of First Resource’s holdings of the two stocks at the fraudulently elevated prices. Stem transferred the proceeds of these stock sales from First Resource’s brokerage accounts to his personal account.”
The SEC says Stern made $169,000 by flogging the stocks, and kicked back 6 percent to the telemarketers.
It wants him to disgorge the money, pay fines, be barred from working in penny stocks, and ordered not to do such a thing again.