SEC Charges Lance Berger l Securities Lawyer 101
According to the SEC, in December 2012, Lance Berger, a stock promoter for several penny stock companies, including FUEG, along with another stock promoter who was a business associate of Berger’s, began discussions with the cooperating witness regarding possible fraudulent stock transactions involving several issuers, including FUEG.
FUEG is a Florida corporation with principal offices located in Valley Stream, New York.
FUEG purported to be in the business of operating an internet gaming website that charged a monthly membership fee. FUEG’s stock was quoted on the OTC Link operated by OTC Markets Group, Inc. and the OTC Bulletin Board under the symbol “FUEG.”
In April 2013, however, the SEC entered an order suspending trading in the securities of FUEG for a ten-day period, pursuant to Section 12(k) of the Exchange Act. In May 2013, FUEG filed a Form 15 to deregister its stock.
The SEC alleges that following a face-to-face meeting on December 7, 2012, Berger, a business associate and the cooperating witness continued to communicate through a series of telephone conversations and emails over the next two months. During these conversations, they agreed the business associate would make a $10,000 inducement payment to Berger and the cooperating witness to participate in the manipulation of FUEG stock. The business associate would pay the money directly to Berger who would then forward $5,000 to the cooperating witness. As part of the scheme, Berger agreed to arrange email blasts and provide “bid support” by lining up the cooperating witness, and possibly others, to purchase FUEG stock.
According to the SEC complaint, Berger also agreed to provide the cooperating witness with advance notice of press releases that he would arrange for FUEG to issue to coordinate with the fraudulent trading. The press releases would be timed so it would appear the buying activity was spurred by positive news about the company.
On February 4, 2013, Berger and the cooperating witness discussed the upcoming manipulation of FUEG stock and when the company would be issuing press releases. Berger told the cooperating witness that the goal was to “. . . get [the stock price] back in the 20’s.” In addition, during that conversation, when addressing how the manipulation could attract potential investors, Berger remarked to the cooperating witness that “people, when they see it, they got [sic] to think that what they’re getting is legit. When they see volume, they think, oh wow . . .”
The next day, on February 5, 2013, Berger told the cooperating witness the business associate had sent him the $10,000 payment. When the cooperating witness asked Berger to wire his share of the payment, Berger said he preferred instead to deposit the money directly into the cooperating witness’s bank account because “they can never hit you for wire fraud, if you never sent one, right?” Berger also mentioned to the witness he had received the advance press release and FUEG was going to be announcing “beta testing” with Facebook.
Berger said the press release would be issued at 9:50 a.m. on February 7, 2013. On February 6, 2013, Berger deposited $5,000 into the cooperating witness’s bank account at a bank in the District. That same day, during a telephone call with the cooperating witness, Berger confirmed he had an advance copy of the press release FUEG would be issuing the following day and that he was in the process of revising the header for the release.
Berger also told the cooperating witness to start buying FUEG stock as soon as the release came out. Later that same day, Berger called the cooperating witness to tell him that the scheme would be pushed back one day from February 7, 2013 to February 8, 2013, and the press release would be issued on February 8 at 9:55 a.m.
On February 8, 2013, at 9:55 a.m. – the exact time Berger had confirmed to the cooperating witness two days earlier – FUEG issued a press release announcing that it had begun “[c]losed Beta testing of its Facebook integrated gaming software.”
That same day, the FBI, posing as the cooperating witness, purchased a total of 35,000 shares of FUEG in the open market, in three separate transactions, at prices ranging from $.20 to $.215 per share, for a total principal cost of approximately $7,350. The cooperating witness told Berger that he had purchased the shares as agreed.
Although Berger and the cooperating witness previously had discussed the possibility of a second round of manipulative buying, ultimately there were no further transactions.
The SEC Charged Berger violating Section 10(b) of the Securities Exchange Act of 1934 (“Exchange Act”), 15 U.S.C. § 78j(b), and Exchange Act Rule 10b-5(a) and (c), 17 C.F.R. §§ 240.10b-5(a) and (c). Without admitting or denying the allegations, Berger consented to an entry of permanent injunction which, among other things:
♦ permanently restrains and enjoins him from violating Section 10(b) of the Exchange Act and Exchange Act Rule 10b-5(a) and (c);
♦ permanently bars him from participating in an offering of penny stock, including engaging in activities with a broker, dealer, or issuer for purposes of issuing, trading or inducing or attempting to induce the purchase or sale of a penny stock; and
♦ provides for the imposition of disgorgement, prejudgment interest and a civil penalty.
Berger also agreed to disgorgemetn of ill-gotten gains ad prejudgment interest and a civil penalty.
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