SEC charges Canadians in US$35M international microcap trading scheme

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New York (February 10, 2020) – The U.S. Securities and Exchange Commission (SEC) charged six businessmen including three Canadian citizens and their companies for their alleged participation in an international microcap trading scheme. The Canadian citizens among the defendants are Steve M. Bajic (49), Rajesh Taneja (43), and Christopher McKnight (45), who are charged with violating the U.S. Securities and Exchange Act. According to the filed complaints, the businessmen are accused of artificially inflating the price of at least 45 microcap company stocks they held in a pump and dump scheme that generated more than US$35 million of illegal sales of stock from July 2015 through June 2019. The SEC is seeking permanent injunctions, disgorgement of allegedly ill-gotten gains plus interest, penalties, and penny stock bars. None of the allegations have been proven in court.

The U.S. Securities and Exchange Commission (SEC) charged six businessmen and their companies with violating the U.S. Securities and Exchange Act for their alleged role in an international microcap trading scheme over a four-year-period. The charges are contained in two complaints, which were filed with the United States District Court Southern District of New York on January 2.

Three Canadian businessmen charged

Among the defendants are three Canadian citizens Steve M. Bajic (49), Rajesh Taneja (43), and Christopher McKnight (45), who allegedly participated in the trading scheme. Furthermore, the SEC charged the U.K. and Switzerland citizen Kenneth Ciapala (38), the U.K. citizen Anthony Killarney (34), and the U.S. citizen Aaron Wise (34).

The businessmen and their companies were charged with violating the antifraud and registration provision of the U.S. security laws and with acting as unregistered offerings of securities as well as broker-dealers, among other security-related charges, according to the SEC documents.

The investigation was led by the SEC’s New York and Boston offices with assistance from multiple international regulators including the Alberta Securities Commission, the British Columbia Securities Commission, the Ontario Securities Commission as well as the RCMP.

The international microcap trading scheme

The filed complaints allege that between July 2015 and June 2019, the accused conducted illegal trading by artificially inflating the price of at least 45 microcap company stocks they held in a pump and dump scheme, which generated more than US$35 million of illegal sales of stock. For the illegal stock sales, the businessmen allegedly fraudulently transferred and hid the sources of the funds, which were used to promote several of the microcap stocks.

Generally, pump-and-dump stock fraudsters promote a penny-stock and sell off their shares when the price rises which often leaves the other shareholders with losses as soon as the stock starts to decrease dramatically.

Read more: Salt Spring Island property claimed in civil forfeiture lawsuit connected to international stock fraud

Furthermore, the complaints allege that their companies ‘sought to evade […] registration and disclosure rules by concealing the identities of control persons (typically by holding the stock in offshore corporate accounts that served as nominee stockholders) from the public, brokers, and regulators.’ Hence, they are accused of defrauding investors by secretly dumping large quantities of stock in manipulative trading.

‘As we allege in the complaints, the defendants evaded the securities registration requirements and engaged in other manipulative conduct, including by disguising the true sellers of securities, to defraud investors and generate illicit profits for themselves,’ said Marc P. Berger, Director of the SEC’s New York Regional Office.

Violating the U.S. Securities Laws

The SEC’s complaints charge Bajic, Taneja, Killarney, Ciapala, and their companies with violating the antifraud and registration provisions of the U.S. federal securities laws and with acting as unregistered broker-dealers. McKnight and Wise were charged with aiding and abetting the fraudulent stock sales and McKnight was also charged with violating an antifraud provision of the federal securities laws.

The SEC is seeking permanent injunctions, disgorgement of allegedly ill-gotten gains plus interest, penalties, and penny stock bars. None of the allegations have been proven in court. The Commission demands a jury in this matter for all claims.