CASES FILED ALLEGEING KICKBACK SCHEMES IN THINLY TRADED STOCKS

The following excerpt is from the SEC website:
December 2, 2011
"The Securities and Exchange Commission announced that, on December 1, 2011, the Commission, U.S. Attorney for the District of Massachusetts, and Federal Bureau of Investigation filed parallel cases in federal court against several corporate officers, lawyers and a stock promoter alleging they used kickbacks and other schemes to trigger investments in various thinly-traded stocks. The Commission filed civil charges of securities fraud against ZipGlobal Holdings, Inc.; Microholdings US, Inc.; Michael Lee of Hingham, MA; James Wheeler of Camas, WA; Paul Desjourdy of Medfield, MA; and Edward Henderson of Lincoln, Rhode Island and alleging they used kickbacks to engage in fraudulent activity involving microcap stocks.
The criminal case charged 13 defendants who engaged in criminal activity in the midst of an undercover FBI operation. According to the charges filed in U.S. District Court, the schemes involved secret kickbacks to an investment fund representative in exchange for having the investment fund buy stock in certain companies; the kickbacks were to be concealed through the use of sham consulting agreements. What the insiders and promoters did not know was that the purported investment fund representative was actually an undercover agent.
The charges follow a year-long investigation focusing on preventing fraud in the micro-cap stock markets. Microcap companies are small publicly traded companies whose stock often trades at pennies per share. Fraud in the microcap stock markets is of increasing concern to regulators as such markets have proven to be fertile grounds for fraud and abuse. This is, in part, because accurate information about microcap stocks may be difficult for the average investor to find, since many microcap companies do not file financial reports with the Commission.
The Commission's complaint charges the defendants with violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5. The complaints seeks a permanent injunctions, disgorgement of ill-gotten gains plus prejudgment interest, civil monetary penalties, penny stock and officer and director bars.”