This year has been a roller coaster for the crypto market. The month of September witnessed one such rollercoaster incidence when biotech billionaires including Phillip Frost and eight other people were accused by the Securities and Exchange Commission (SEC) over a penny stock fraud.
Though Phillip Frost was the leading member in this scam, he has got arrested too. This scam was worth $27 million. The fraud involved purchasing penny stocks and then intentionally and effectively increasing their value so that these shares can be dumped after earning a massive amount worth $27 million.
When it comes to trading, there is a fine line between legal and illegal activities. If you look at the fraud done by the group of these nine, at the superficial level you might find it usual; you might think this is what the market is all about. But that is not the case. As per the initial complaint raised against these nine men, their activities were not usual. They are guilty of things more than just trading with a few foolish investors. Their accusations involve:
One of these nine men named Honig allegedly created an impression of the acquisition of various units of the issuer’s stock with sharp discounts. However, after buying these stocks at an extensive interest, Honig, Phillip Frost, and their team decided to involve in illegal activity by conducting illegal promotional tricks to increase issuer’s stock price of each bought unit artificially. By doing this, these men wanted to create an impression that these stocks are actively positive stocks to buy in the market.
The scam had included three companies which stocks were artificially boosted and dumped. Frost was involved in two of them. He reached a settlement with the SEC where it was concluded that Frost does not have to accept or deny the accusation. Plus, he has agreed to pay $5.5 million in compensation and has decided to stay away from involvement in most types of penny stocks for his life.
Frost’s involvement in this Penny Stock Scam was restricted only in helping for the illegal promotion of the two companies he was involved, along with investing in such ways that the stocks would get pumped.