By now any penny stock sleuth who hasn't spent the past few days in an Internet free zone is aware of the civil and criminal charges brought against, among others, Matt Brown, founder and chief moderator of the Investors Hub message boards. With one exception all named defendants have been arrested and released on bail ranging from $50,000 to $500,000. Polish national Pawel P. Dynkowski, named as key in the scheme cannot be located, and it is rumored that he has fled the country.
In the SEC complaint the scheme is described as follows:
...Defendant Pawel Dynkowski and his accomplices agreed to sell large blocks of shares for penny stock companies (or "issuers") in exchange for a portion of the proceeds. The issuers put these shares in nominee accounts that Dynkowski controlled. Dynkowski and his accomplices then pumped the market price ofthe stocks through wash sales, matched orders, and other manipulative trading, to give the market the false impression that there was real demand for these securities. They often timed this manipulative trading to coincide with false, misleading, and touting press releases from the issuers, which Dynkowski at times prepared himself. After artificially inflating the price of the stocks, Dynkowski and his accomplices then sold the shares they obtained from the issuers to the unsuspecting market. Dynkowski, his accomplices, and the issuers shared the illicit profits.
Although the investigation is described as continuing, rather obvious omissions from the first round of named miscreants are the penny stock companies themselves.
The four companies named gave stock to Dynkowski, Brown et. al. who manipulated the price and volume through wash trades, false and misleading press releases, and favorable posts on IHub message boards. The stock was then sold to the now-drooling suckers, and the proceeds split in some ratio with the issuers.
Hello. What is missing from this picture. Issuers actively participated in the alleged (but well-documented) scheme and shared in the illicit profits. Are they playing nice with the Federales to help build the case against Brown and friends? Will they get to keep their share of profits from the scheme (if they haven't blown them yet, as penny stock "CEO's" are wont to do)? Or are the SEC folks just too damn busy going after a geriatric stock manipulator's small time (and stupid) scheme to try and recover his $40,000 lost nest-egg? Time will tell, one supposes.
On a parenthetic note, I would be very, very conservative if I were stealing the $6 million that we know about. Matt and the Boyz, on the other hand, styled themselves like Medellin Cartel members out on the town in South Beach. Their choice was a lost weekend in Vegas in 2006 partying like rock stars. Matt's pictures of that trip posted on IHub have mysteriously disappeared.
More as developments unfold.