(Bloomberg) “I still couldn’t understand how a wannabe musician from Long Island had become a millionaire investor virtually overnight. I’d found a 2012 lawsuit in which a financier named Yossef Kahlon accused Sason of copying his business model, but the only thing Sason would say about him is that they hadn’t spoken in years”.
“Magna wasn’t the only group calling. Executives of penny companies say that when their stock has a high trading volume, they get bombarded by young salesmen and washed-up bankers asking if they need cash—and often they say yes”. …..”“All they care about is the liquidity of the stock,” he says. “They want to see how many dollars are trading a month.””
This story provides us with a unique look into the hidden infrastructure of a penny stock pump and dump operation.
Pictured below is the official complaint referenced in that Bloomberg article. In Texas they give exemption from registration when you sell to large investors — the official term is accredited investors — but he was just buying then dumping immediately into the open market, and many times not in Texas.
At first, several experts who aught to have known said it was legal…
In the complaint, you can see that he was relying on the opinion of “numerous” (keyword) SEC enforcement attorney’s to legally justify the fraud by inventing legal loopholes which could be used to prove that he didn’t have criminal intent, so even if he were to get into trouble, he could just say that he didn’t intend on breaking the law because a group of experts said it was legal…
It also shows that there exist other people standing behind these ring leaders, and that contrary to what most people tend to believe, these are the real power players, with the supposed young rags-to-riches success stories almost acting as the sort of front-men for the operation. They take all the risk; their names are signed on every document, and they are the face of the franchise, but it is the people standing behind the scenes that you never hear about who are the true facilitators..Ironically, you tend to see similar organizational structures in drug-dealing.
The strategy seems to go something like this: find a broke man/woman in their early to late 20’s, maybe even early 30’s (but no more), lend him/her the money — while also providing all the necessary tools that they would otherwise be incapable of locating or understanding — and doing your best to remain, or at least appear to be, at “arms-length“.