MANHATTAN (CN) - The SEC froze the assets of an alleged stock scalper Thursday and sued him in Federal Court - but it can't find him.
The SEC sued sole defendant John Babikian, claiming he used AwesomePennyStocks.com and its related site PennyStocksUniverse.com to scalp stocks.
Babikian, 26, is a citizen of Canada who also hold passports from Lebanon, Nevia and Guatemala, the SEC says. It adds, in the complaint: "Formerly a resident of Montreal, Babikian left Canada in 2012 in the wake of tax evasion charges by Canadian authorities. His current whereabouts are unknown."
The SEC claims Babikian made more than $1.9 million from scalping a single security.
The lawsuit begins: "This case involves a type of securities fraud known as 'scalping.' A defendant illegally scalps securities when that defendant (i) purchases shares of a security for his own account prior to recommending or touting that very security to others, (ii) does not disclose in the tout the full details of his ownership of the shares and his plans to sell them, and (iii) proceeds to sell his shares following the tout's dissemination, and into the share price and trading volume increases triggered by his tout."
The SEC claims it has nailed Babikian to the minute.
The 15-page complaint continues: "Beginning at approximately 2:30p.m. (Eastern) on Thursday, February 23, 2012, an affiliated Internet-based platform of microcap promotion websites registered and directly and indirectly controlled by defendant John Babikian caused touting materials to be widely disseminated over the Internet concerning America West Resources Inc. (OTC: A WSR) ('America West'), a Nevada corporation whose stock was quoted on the OTC Link. These touting materials said things like, "Brand new pick coming March 1st!" and identified that "pick" as "AWSR," which was the ticker symbol for America West.
"Babikian defrauded investors by failing to sufficiently disclose in these touting emails material information, to wit that he held a large position in the America West stock and intended to immediately liquidate as much of it as he could that very same day into the rise in stock price and trading volume caused by his touts. Babikian then immediately proceeded, in the 90 minutes remaining after the touts' dissemination that very same trading day, to sell over 1.3 million shares of America West stock into the share price and trading volume rises triggered by his touts, for ill-gotten gains in excess of$1.9 million. Simply put, Babikian illegally scalped America West.
"Prior to the issuance of these touts, America West was a low-priced, thinly traded stock: Its closing price on February 22, 2012 had been $.29. On February 23rd, there had been no trading volume whatsoever in America West's stock until after the touts were disseminated at approximately 2:30 p.m. (Eastern). In the weeks leading up to February 22, America West's trading volume was often zero or near zero and never more than tens of thousands of shares. The touts, however, triggered immediate and dramatic increases both to America West's share price and to its trading volume, the former reaching a high of $1.80 before closing at $1.29, and the latter exceeding 7 million shares. It was these rises that Babikian immediately exploited by selling over 1.3 million shares of America West at an average price of more than $1.38, and effecting these trades through a Swiss bank, Zurich-based Frankfurter Bankgesellschaft (Schweiz) ('Frankfurter Bank'), to which Babikian had methodically transferred his shares over many months."
The SEC seeks disgorgement, penalties and an injunction.