SEC Freezes Bugatti-Driving 26-Year-Old "AwesomePennyStocks" Owner's Assets

Tyler Durden's picture

"Compared to the ones I ran into," noted former-SEC chief, John Babikian's 'AwesomePennyStocks' fraud "is the biggest on ever." As Bloomberg reports, short-sellers and stock promoters have puzzled for years over who operated one of the largest penny-stock websites. A U.S. lawsuit points to a Bugatti-driving 26-year-old from Montreal. The SEC is freezing Babikian’s assets, including two homes and the proceeds of selling a fractional interest in a plane. "The traditional Stratton Oakmont has been replaced by the opt-in newsletter... the world of pump-and-dumps occurs in the shadows." Welcome to the new 'get-rich-quick' bubble euphoria...

 

Via Bloomberg,

"AwesomePennyStocks"...

John Babikian used an e-mail list called AwesomePennyStocks to tout a coal company’s stock while dumping his own shares, the Securities and Exchange Commission said last week in a civil complaint. AwesomePennyStocks’ messages about that firm and 38 others, sent over five years, helped fuel spikes in share prices that boosted the combined value of the stocks by as much as $3 billion, according to data compiled by Bloomberg.

 

Bulk e-mails have long-since supplanted the boiler rooms of the 1990s as the most effective way to hype shares of little-known companies. The value of a prescription-drug distributor that AwesomePennyStocks promoted in 2012 ballooned by more than $700 million within two months. After the messages stopped, the shares collapsed.

 

“Compared to the ones I ran into, that’s big,” Tom Sporkin, the SEC’s former chief of market intelligence, said of the website after Bloomberg News shared the data with him. “It’s the biggest one I’ve heard of.”

The New Wolf of Wall Street...

Babikian owned a Bugatti Veyron -- the cars cost more than $1 million and take 2.5 seconds to hit 60 miles (96.6 kilometers) per hour -- as well as a Bentley and Lamborghini, according to documents from Revenue Quebec, the province’s tax authority. It obtained a judgment allowing seizure of some of his assets last year, after he left the country, relating to its claim that he owed C$4.6 million ($4.1 million) in unpaid taxes.

 

The SEC is freezing Babikian’s assets, including two homes and the proceeds of selling a fractional interest in a plane, the agency said in a March 13 statement. Babikian bought a boxy, modern Los Angeles house in 2010 for $2.2 million

As things have changed...

AwesomePennyStocks was “one of the biggest promoters,”

 

“The traditional Stratton Oakmont has been replaced by the opt-in newsletter,” Coulson said, referring to the boiler room depicted in “The Wolf of Wall Street,” the 2013 movie directed by Martin Scorsese. “People just get an e-mail and they buy these things without doing any fundamental analysis.”

 

...

 

“It’s what I call the street crime of securities,” Sporkin said. “The world of pump-and-dumps occurs in the shadows.”

 

...

 

"The sheep that buy end up holding the bag and losing everything,”

Mystery Man...

Short-sellers and rival stock promoters said in interviews that AwesomePennyStocks was the biggest and most successful of the penny-stock websites and that they had tried for years to figure out who was behind it.

 

...

 

“It was always kind of a mystery,” Peter Nicosia, who runs a stock-promotion site called Bull in Advantage LLC, said late last year. “They had the market cornered.”

Awesome...

AwesomePennyStocks has closed after “an AWESOME run over the last few years,” according to the website. “We have seen multiple picks soar dramatically from our initial alerts, and we have seen our members reap the profits.”

We are sure this unfortunate promotion will do nothing to sour the get-rich-quick mindset of American investors as they see day-after-day how easy it is to day-trade and make millions from a market that never fails...

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Ratscam's picture

E-Jordan Belfort

Looney's picture

Who cares 'bout a 26-year-old kid, unless he/she pukes all over a celebrity? ;-) I wanna see all RIFIN's top CEO's being... bwaa-haaa-haaa... given MOAR bonuses.

I am George W. 'Bama and I approve this messenger-er  ;-)

Looney

NoDebt's picture

If you're stupid enough to invest based on recommendations from a place called Awesome Penny Stocks, I'm sorry, but stupid is one thing that just can't be fixed.

willwork4food's picture

I stupidly bought a ton of penny stocks years ago and this guys site sounds familiar. The assholes that ran the company were from Chicago and were pumped by a NJ company. Everything looked good. Naturally my greed had glazed my eyes wide shut at the time. When they handed all of us a 250:1 REVERSE stock split, I looked deeper and had quite a lot of emails from the assholes all around, including threatening to be sued -by them. I submitted it with a shitload of evidence of fraud to the SEC, the VA SEC and had one idiot guy actually come out to my house and say nothing could be done because it wasn't a VA company. Then WTF did you waste your time for coming out when you had the reports I emailed/mailed you?

Learned a valuable lesson. Never say education is cheap.

A Lunatic's picture

I'll give you four stars for clarity, but you might want to work on your delivery.....

quintago's picture

Somebody tell me how this is different than GS selling paper they were simultaneously shorting.

CognacAndMencken's picture

Whatever happened to The National Inflation Association? They used to create a bunch of doomsday videos that many of the silver/gold bugs loved. Once they got your attention with nonsensical hyperinflation videos, they'd do weekly email blasts and shamelessly pump some stupid penny stock. Apparently, the best way to protect yourself from imminent financial ruin was to buy *this* particular penny stock.

Hilariously, most of the silver bugs fell for it. Pure buffoonery.

Moe Howard's picture

I invested in a stock NIA recommended and made about 3 grand.

Neveer tried it again, though.

Chuck Norris's picture

"It obtained a judgment allowing seizure of some of his assets last year, after he left the country, relating to its claim that he owed C$4.6 million ($4.1 million) in unpaid taxes."

Note to self: next time I run a boiler room scam, pay my taxes.  Maybe I'll get away with it. 

Leveraged Algorithm's picture

No different than Congress and their insider trading.

Handful of Dust's picture

Babikian sounds like top-notch Wall Street material.

Bonapartist's picture

Doesn't sound like enough of a sociopath

Buck Johnson's picture

Exactly, exactly.

 

 

 

Groundhog Day's picture

Ahhh yes, when a young lad pumps and dumps and makes millions off of individual investors the SEC is all over him but when GS, JPM, MS, at al front run client trades or take the other side of their own recommendations and make billions it's perfectly legal and ok

Vampyroteuthis infernalis's picture

Do as I say, not as I do. 

-The squid

SmackDaddy's picture

yeah, it's not fraud, just an 'economy of scale'

AlaricBalth's picture

This kid is just a bagholder for the masterminds behind these schemes. Small cap lending service companies prey on undercapitalized penny stock companies. They offer loans, convertible into common shares at a fraction of the listed price. Upon the inevitable default due to misallocation of loan proceeds into the hands of complicit exec's, the loan is converted into millions of shares of discounted stock. Then the company or lender hires these stock promotion entities to furiously pump the stock to unwitting investors looking for a home run. Subsequently the shares are dumped by the lenders and the stock plummets.

aVileRat's picture

Yup

Bucketshops which promote or leverage crap projects is a scam as old as the Buttonwood tree's table. Sadly, if you ban the pink sheets, the legitimate funding avenue for retail participation would be cut off. Regulation has done jack shit to control the gambling and bullshit that goes on down there.

 

AlaricBalth's picture

Exactly.

The most important aspect of these schemes is to have the restricted shares, which are issued as a result of the loan default, recategorized as free trading. This maneuver needs an opinion letter from an unscrupulous lawyer, which for the right fee is not hard to find.

On July 31, 2013, the Securities and Exchange Commission (“SEC”) brought an enforcement action against securities lawyer, Diane Dalmy...

http://www.securitieslawyer101.com/diane-dalmy/

steelhead23's picture

This is one hell of an accusation.  If this is true, the feds should offer to let the kid keep his car - if he rats-out the players behind the curtains.  You see, if Alaric is right, this is a looting operation, designed to cover losses in the credit departments of some very large institutions.  By golly, it could even send people to jail.  Hmm - I note that elsewhere I have seen that Babikian is nowhere to be seen.  Could it be that one or more of his "accomplisses", having seen how Belfort treated his accomplisses after being nailed, took him out?  If Alaric is even the tiniest bit right, the knock on the door John Babikian should most fear is not the federales, but the mafioso.

Groundhog Day's picture

Yorkville advisors and the ilk do it for a living

TideFighter's picture

In my early trading days, it was Tokyo Joe. Joe made 1mm a month just off of dues.

Silver Shield's picture

How is this any different than BitCoin?
Take something worthless and pump it to the greater fool.

LetThemEatRand's picture

Free Corzine, Blankfein and Dimon.

Overfed's picture

Alas, had he contributed more $$ to the O'bomb-a campaign and/or DNC, his name could be on that list as well.

LetThemEatRand's picture

Very true.  And just FYI, Cruz is married to a Goldman exec and Romney's number one contributor was GS.  GS was Obama's number two if I recall (or maybe vice-versa, but what's the dff).

Overfed's picture

Yeah. I know. There are no good options, the last one just recently retired. We're pretty much fucked.

On that note, I had a table at a local gunshow recently, and one of the vendors was lamenting Ro-money's defeat in the (s)election. I challenged him to name one even slightly important thing that would be different right now had he won. Naturally, he couldn't.

fxrxexexdxoxmx's picture

Romeny would not have been able to scream racism while telling bold face lies.

Although he would have been called a racist by Senator Obama when the Senator got caught telling bold face lies

optimator's picture

Tribute to Ceasar and all would have been well.

fijisailor's picture

So this was "the wolf of wall street"?

Cacete de Ouro's picture

In for a penny, in for a pound

Freddie's picture

 

"The sheep that buy end up holding the bag and losing everything"

Sounds like Obama voters.


Dr. Engali's picture

Thank goodness Jon Corzine is free.

disabledvet's picture

"faster than my car can get to 60 I can get you to...

i knew a guy at the receiving end of this at work. one day he came up to me and asked me what a reverse split was. i didn't have the wheremegal's to tell him the meaning in the truth.

this was long before Citigroup of course. How this can actually be illegal post 2008 is beyond me actually. "You know the market might be getting toppy when the Government actually does start arresting people" though. I mean at one time Ford Motor was under buck a share.

Azwethinkweiz's picture

DROP just voted on having a R/S. Tiger wore that shit on his bag....look at all the athletic-celebrity endorsements on that one. Not to mention, Bruce Krasting's pump and dump of $DROP. Hey, The Bruce, did you recommend a sell to your homies when it hit .30? That was only a month or two after you published your article.

insanelysane's picture

I see the difference.  This guy got people to make a decision and buy stocks he was selling.  On the other hand, Corzine and Company, just went in and made the decision for people to directly transfer their money into the company account.  It's completely reasonable that this guy is going to do time and Corzine is walking around.  One influenced people into giving up their money and the other influenced the "justice system" into not finding anything wrong with transfering money without permission.

Azwethinkweiz's picture

Are you dumb, dude? Yeah, I said "dude."

So because THIS GUY had morons who subscribed to a letter and those morons believed in his words, he should do time.

BUT, Corzine, who had politicians in his pocket, who ran the same sort of scheme only by not sending letters but by sending contracts which under law were protected against segregating client funds and then gambling with those client funds, should do no jail time?

DARWIN WOULD BE SO FUCKING PROUD.

Yes, let's protect the idiots with an IQ of 11 and give only a portion of their stolen funds, which those with a far greater IQ, pennies on the dollar...and let's put the guy in jail who only took advantage of idiots over the guy who stole from semi-smart people.

How do you not see the difference????

TheReplacement's picture

Chillax bra-a-aa-a.  I think he was going for how he can understand how this has come to pass due to (read between the lines part) corruption in government.  In other words, you would be stupid to expect anything else.  He agrees with you on how wrong it all is.

Azwethinkweiz's picture

I downvoted you for being willfully stupid. You get it...you just fail to see the reasoning. Wise up!

A Lunatic's picture

Lesson #1; never take those bulk e-mail solicitations seriously. (unless it's the one about how my mom makes thousands a month from home; those are for realz..........)

TheReplacement's picture

I don't get those.  How does she do it?

Seize Mars's picture

Ok, fine - where the fuck is Corzine hiding?

Oops, sorry Dr. Engali, you beat me to it.

Dr. Engali's picture

No reason to apologize for a question that needs to be asked repeatedly until these bastards come to justice.

disabledvet's picture

justice?
I'll become a doctor the day that happens.