In a complaint filed in a California federal court today, the Securities and Exchange Commission (“SEC”) claims that Defendant, Michael M. Beck (“Beck”), is on the hook for using his Twitter account (@BigMoneyMike6) to encourage his 3 million followers to purchase various microcap stocks without disclosing his intent to sell. This fraudulent and malicious pattern is more commonly known as a “pump and dump,” and resulted in profits totaling roughly $870,000.
From 2017 to 2019, Beck’s Twitter account @BigMoneyMike6 had about 3 million followers. Beck would use his Twitter account to invite his followers to join his TeamBillionaire email group by tweeting statements suggesting he could make his subscribers rich. For example, on September 13, 2017, Beck tweeted “GOT #PENNYSTOCKS? WANNA TURN A $5,000 INVESTMENT INTO $50,000+? JOIN #TEAMBILLIONAIRE ASAP.” By 2017, Beck claims TeamBillionaire had more than 740,000 members.
The SEC states Beck’s fraud consisted of the following steps:
In some instances, the SEC claims Beck even paid third parties to post favorable messages about the stocks on Investorshub.com prior to time the tweet alert would be sent out.
The Complaint begins its 15-page detailed history of Beck’s pump and dump scams with the “Pick-Ups scalping scheme.” In April 2017, the ticker PUPS was trading around $0.0035 per share. Beck began purchasing the stock on or about February 7, 2017, with a majority of his shares priced at $0.0018 per share or lower. On April 19, 2017, Beck tweeted “THE APRIL 25TH MEGA ALERT IS LESS THAN A WEEK AWAY” and that, “NEXT TUESDAY COULD NOT ONLY BE MY BIGGEST ALERT EVER BUT COULD BE.. THEE BIGGEST ALERT EVER.”
Following his tweet, Beck emailed TeamBillionaire on April 23, 2017 and stated “The stock I’m going to get you into is currently trading at $.005 and will be trading $.05+ by Tuesday the 25TH . . . The stock that is going to make you a ‘minimum’ of 500% on your investment is…………….. $PUPS.”
This is where things get really murky. Beginning on April 25, 2017 through May 9, 2017 (more than a month after Beck began loading the stock), Beck tweeted recommendations to purchasePUPS. On April 25, 2017, Beck tweeted, “I'VE BOUGHT 27,000,000 SHARES OF $PUPS TODAY! IM STILL LOADING.. LETS SQUEEZE THE SHORTERS !!!” Again, on or about May 1, 2017, Beck tweeted, “$PUPS WILL BE GREEN EVERYDAY TILL CHRISTMAS !!!!!! $PUPS WILL BE AMERICAS #1 STOCK !!!" During this promotional campaign, PUPS' stock price rose from $0.0050 to $0.0085 per share, between April 21, 2017 (the last trading day before the first TeamBillionaire email) and April 24, 2017 (the first day of TeamBillionaire emails).
Defendants allegedly sold 45.4 million shares of PUPS for combined sales proceeds of $218,000.
In addition to PUPS, Beck repeated the above pump and dump pattern with MK Automotive (MKAU), Zann (ZNNC), Vidaroo (VIDA), CASG (CASG), Marquie (TMGI), Peoplesway (PLWY), and USCOO (USCO). The complaint describes each alleged scam in detail with corresponding tweets, volume increases, price increases, and profits.
The problem, according to the SEC, is that “Beck knew that his statements were materially false and misleading because he was aware of his own trading activity.” Because he failed to disclose his intentions to his followers, the SEC says Beck “concealed material information about his trading” and that “it would have been important to a reasonable investor to know that Beck was selling, or intended to sell, the Issuers’ stocks, at the time he was recommending others purchase the stocks.”
As a result of Beck’s alleged pump and dump scam, the SEC believes he earned roughly $870,000 in pecuniary gains.
The complaint concludes the above pump and dumps violated “the antifraud provisions of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, 15 U.S.C. § 78j(b) and 17 C.F.R. § 240.10b-5(a)-(c), as well as the antifraud provisions of Section 17(a) of the Securities Act, 15 U.S.C. § 77q(a)(1)-(3).” \\
A few interesting thoughts from my initial read of the complaint (there will be more to come from me as this case progresses) is that this act of buying a small cap stock in blocks with the intent to alert it to mass amounts of followers and then sell into artificially created volume is something that is still happening daily. The SEC has been surprisingly quiet surrounding pump and dump scams, but maybe this is the start of a new era.
It is worth noting that nowhere in its complaint did the SEC mention whether or not Beck disclosed he was not a financial advisor and that his tweets were not financial advice. Because Beck’s actions were so fraudulent and malicious, it doesn't matter if Beck was a licensed financial advisor or not.
Also interesting are the remedies that the SEC is seeking in connection with Beck’s alleged pump and dump scams. The SEC is asking for a judgment in the form of unspecified civil penalties, complete disgorgement of all funds received from the “illegal conduct” with “prejudgment interest,” and an order against Beck prohibiting him from “participating in an offering of penny stock” amongst other things.
A rep for Beck was not immediately available for comment
The case is SEC v. Beck and Robinson, LLC, 2:22-cv-00812 (CDCA).
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