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Spoofer Wreaked Market Havoc, SEC Says

MANHATTAN (CN) - A Bulgarian "spoofer" drove up the price of Avon stock by 20 percent in a day with false claims that it was being sold for 181 percent of its shares' list price, the SEC said Thursday.

The SEC claims Nedko Nedev, 37, fraudulently manipulated share prices of Avon and two other companies by filing false tender offers on the SEC's public database, known as EDGAR, and false press releases.

In its federal complaint the SEC says Nedev coordinated the frauds with four other defendants, at least two of which, if they exist at all, exist solely to manipulate stocks.

They are PTG Capital Partners Ltd., PST Capital Group Ltd., Strategic Capital Partners Muster Limited, and Strategic Wealth Investments. They will be described later in this article.

PTG Capital Partners gained access to EDGAR on May 14 and filed a false tender offer for Avon, claiming it was buying all of its stock for $18.75 a share: 181 percent of the May 13 closing price, the SEC says in the complaint.

"As a direct result of this fraud, Avon's share price increased approximately 20 percent in intra-day trading and the volume increased approximately 448 percent in one day," according to the SEC lawsuit.

This came a year and a day after a similar fraud, the SEC says. On May 13, 2014, a fraudulent press release issued in the name of Euroins Insurance Group claimed the company was buying Tower Group International for $3.75 per share, driving Tower shares up by 32 percent in a day on a volume increase of 1,963 percent.

And on Dec. 18, 2012, PST Capital Group gained access to EDGAR and claimed to be buying Rocky Mountain Chocolate Factory for $13.50 a share: 27 percent above its list price, fraudulently driving the share price up by 4.6 percent on a volume increase of 1,780 percent, in a day.

Nedev held positions in all those companies through a brokerage account in the name of Capital Partners Muster Limited, the SEC said. It claims that a brokerage account in the name of Strategic Wealth Investments did the same thing.

According to the SEC lawsuit:

PTG Capital claims to be incorporated in the British Virgin Islands and based in London. "However, there is no indication that PTG Capital is a legitimate company organized for any other reason than the stock manipulation scheme described here, and PTG Capital (to the extent that it actually exists) is operated from Sofia, Bulgaria."

The SEC lawsuit describes PST Capital in exactly the same words.

Strategic Capital claims to be incorporated in the British Virgin Islands and based in Sofia, Bulgaria. Its brokerage account "has routinely been accessed from Sofia," the SEC says.

Strategic Wealth is incorporated in Nevada and based in Henderson. Its account was opened by a Bulgarian citizen, and the same IP addresses in Sofia have "frequently accessed both the Strategic Capital and Strategic Wealth brokerage accounts."

Strategic Wealth has traded in all three stocks at issue. In fact, on April 30, 2014, 99 percent of its account value consisted of Tower Group and Rocky Mountain stock, the SEC says.

Nedev is believed to have made $4,879 from his Avon trades, and $23,368 from the Tower manipulation.

Both times, he dumped his shares less than half an hour after the fraudulent press releases, the SEC says.

After the bogus offer for Rocky Mountain, the company announced that there were "numerous problems with this proposed tender offer that case doubt on its credibility," the SEC says. Though its share price rose by 4.6 percent, Nedev did not sell, "likely because the false document did not cause a large enough price increase" and because of Rocky Mountain's warning, the SEC says.

It seeks disgorgement, penalties and an injunction, and an emergency order freezing accounts.

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