LAS VEGAS (CN) – Eleven people took more than $64 million from 40,000 suckers nationwide by selling 622 billion unregistered, illegally issued shares of CMKM Diamonds, the SEC says in a federal lawsuit. CEO Urban Casavant and cronies pushed the stock through bogus press releases, on the Internet and at Funny Car races across the country without revealing that Casavant ran the company from his Las Vegas home and that “CMKM’s primary activity was to issue and promote its own stock,” the SEC said.
The “mastermind” of the penny stock scheme was John Edwards, then of Las Vegas, the SEC claims. It said Edwards made $26.4 million from selling the stock at “well under a penny a share,” and Casavant made $31.5 million from it.
Others in the ring profited to the tune of $6.3 million, according to the SEC complaint.
The ring’s profits come to 6.4 billion pennies – roughly 4.5 percent of the pennies in circulation.
The 11 individual and three corporate defendants issued 622 billion shares, “based in large part on both written authorizations and attorney opinion letters prepared by Brian Dvorak, CMKM’s lawyer, which were often inadequate, suspect, and inconsistent,” the SEC says.
Based on these faulty documents, CMKM’s transfer agent, 1st Global Stock Transfer, and its owner, Helen Bagley, issued “stacks of certificates,” the SEC says.
Edwards’ cohorts, Kathleen and Anthony Tomasso, and Casavant’s cronies, James Kinney and Ginger Gutierrez, then deposited the shares with broker-dealers for sale, the SEC says. It claims NevWest Securities Corp. and its employees Anthony Santos, Sergei Rumyantsev and Daryl Anderson sold more than 259 billion shares of CMKM, “despite numerous red flags indicating a massive unregistered distribution.”