The SEC alleges that the group included stock promoters, traders, and a lawyer who wrote a fraudulent opinion letter. The scheme resulted in more than $7 million in illicit profits from sales of stock in CO2 Tech Ltd. at artificially inflated prices. Despite touting impressive business relationships and anti-global warming technology innovations, CO2 Tech did not have any significant assets or operations. The company was purportedly based in London, and its stock prices were quoted in the Pink Sheets.
According to the SEC’s complaint, the scheme was perpetrated through Red Sea Management Ltd., a Costa Rican asset protection company that laundered millions of dollars in illicit trading proceeds out of the United States on behalf of its clients. The US Department of Justice has also announced related criminal charges against six of the individuals.
“This group of illicit stock promoters sought to hide their scheme behind offshore entities, but their misconduct was exposed by the excellent cooperation of law enforcement agencies here and abroad,” said Cheryl Scarboro, Associate Director in the SEC’s Division of Enforcement.
The SEC’s complaint alleges that CO2 Tech falsely touted business relationships that the company had not formed, including a relationship with the Boeing Company. In fact, there were no communications, correspondence or understandings between CO2 Tech and Boeing.
The SEC alleges that certain of the individuals initiated the pump-and-dump of CO2 Tech by utilizing the services of Krome, who issued a fraudulent opinion letter to enable them to have the restrictive legend removed from their CO2 Tech stock certificate. This provided them nearly full control over the freely tradeable shares of CO2 Tech stock. They then hired Red Sea to sell massive quantities of CO2 Tech stock to the investing public through its web of nominee brokerage accounts. Zigdon caused the materially false and misleading information about CO2 Tech to be disseminated in press releases and on CO2 Tech’s website.
According to the SEC’s complaint, these individuals redistributed the false information through websites, spam e-mails and fax blasts. A group of stock promoters were also enlisted who then executed illegal “matched orders” with Red Sea’s nominee brokerage accounts in order to “jump-start” the market and increase the price of the stock. As a result of the false media campaign and the illegal matched orders, the market price of CO2 Tech stock increased 81 percent increase in one day and trading volume increased 1,573 percent.