GIH: The SEC is dealing with a new generation of digital ‘boiler rooms’ – email lists & forums that present misleading information to lure investors.  “AwesomePennyStocks” was apparently one of the largest such newsletters, promoting otherwise worthless companies many times dumping their own shares as the price rise.  Sadly, many clients don’t bother to do their own research, and blindly believe whatever is in such newsletters.  Also, the internet has become polluted with such sites – while “AwesomePennyStocks” was a successful fraud, thousands of others that are less successful, proliferate incorrect information about investing.

“Compared to the ones I ran into,” noted former-SEC chief, John Babikian’s ‘AwesomePennyStocks’ fraud “is the biggest on ever.” As Bloomberg reports [5], 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 “The traditionalStratton Oakmont has been replaced by the opt-in newsletter… the world of pump-and-dumps occurs in the shadows.”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, [5]

“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…