On March 6, three individuals including former Riot Blockchain CEO John O’Rourke III agreed to settle with the United States Securities and Exchange Commission (SEC) for $3.5 million over three alleged penny stock pump-and-dump schemes.
The terms of the settlement will see Michael Brauser, John Stetson, and O’Rourke pay disgorgement, prejudgment interest and civil penalties. The trio will not admit or deny the allegations laid out in the SEC’s 2018 enforcement action against the trio.
“Microcap fraudsters” settle with SEC
O’Rourke’s and Stetson will each have to pay penalties exceeding $1.15 million, while Brauser will have to pay roughly $1.17 million.
O’Rourke, O’Rourke’s company ATG Capital, Brauser, and Brauser’s Grander Holdings are permanently banned from engaging in all activities relating to penny stock offerings, while Stetson and Stetson Capital Investments are prohibited from involvement in penny stock offering for 10 years.
The judge also issued a partial ruling against HS Contrarian Investments — a company for which Stetson was the managing director.
O’Rourke left Riot Blockchain during September 2018 following the SEC’s enforcement action against him. O’Rourke was replaced by Riot’s then-chief operating officer Chris Ensey.
Riot Blockchain investor allegedly masterminded penny stock manipulation
The three individuals and four companies are the last to settle in the case — which brought charges against 10 individuals and 10 corporate entities concerning three alleged pump-and-schemes masterminded by venture capitalist and Riot Blockchain investor Barry Honig.
The group of 20 individuals and companies allegedly generated more than $27 million in profits through a coordinated manipulation of three microcap penny stocks. The SEC described their actions as comprising “brazen market manipulation” that involved “fleecing innocent investors [who] were left holding virtually worthless stock.”
The SEC alleged that Honig orchestrated the acquisition of large sums of penny stock issuers’ shares for discounted prices, before he and his associates “engaged in illegal promotional activity and manipulative trading to artificially boost each issuer’s stock price and to then give the stock the appearance of active trading volume,” then “[dump] their shares into the inflated market.”