The Securities and Exchange Commission has charged three companies and 11 people in an alleged scheme to illegally issue and sell penny stocks "in a purported diamond and gold mining company." Through this activity, the defendants obtained more than $64 million from tens of thousands of investors across the country, the SEC says.
The SEC complaint alleges that CMKM Diamonds, Inc., with assistance from a transfer agent and an attorney, fraudulently issued hundreds of billions of shares of purportedly unrestricted stock to the scheme's mastermind. The complaint also alleges that CMKM's CEO Urban Casavant generated investor interest in the company through false press releases, Internet chat boards, and "funny car" race events across the country without disclosing that he ran the company from his house in Las Vegas and that CMKM's primary activity was to issue and promote its own stock.
"The allegations in this case highlight the significant investor harm that results from abuses in the penny stock market," Rosalind Tyson, acting regional director of the SEC's Los Angeles regional office, said in a press release. "Although CMKM's stock sold for well under a penny a share, the defendants were able to reap millions in profits by conspiring to flood the market with billions of unregistered shares while falsely promoting CMKM's value."