SEC Nails Pot Stock Promoters
On July 9, the Securities & Exchange Commission (“SEC”) settled with Alexander Hawatmeh and Christopher Mrowca who allegedly received more than $2.5 million by manipulating penny stock pot stocks. According to the proposed judgments filed in the US District Court for the Western District of Washington, Alexander Hawatmeh and Christopher Mrowca each consented to an SEC permanent bar from participating in penny stock offerings and to a permanent restraint from further violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, Section 9(a)(1) of the Exchange Act and Section 17(a) of the Securities Act.
The SEC alleged that Hawatmeh and Mrowca engaged in a pump-and-dump scheme and used manipulative trading tactics, such as wash trading, and matched orders to artificially inflate the stock prices of certain thinly traded penny stocks. The SEC alleged that the defendants used social media and websites under their control to pump the stocks. According to the SEC’s complaint, Hawatmeh and Mrowca misled potential investors about the issuers involved in the schem including that their stock price would rise substantially. In reality, two of the target companies had no business operations.
The SEC alleged that the defendants sold their shares and profited by more than $2.5 million in profits. Earlier this year, Mr. Hawatmeh and Mr. Mrowca were sentenced to five and three years in prison in a related criminal case. Under the SEC judgments, Mr. Hawatmeh and Mr. Mrowca are liable for disgorgement of approximately $2.1 million and $306,000 in illicit profits, respectively.
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