U.S. SEC sues Canadian fugitive for "scalping" investors

Thu Mar 13, 2014 3:24pm EDT
 
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By Jonathan Stempel

March 13 (Reuters) - The U.S. Securities and Exchange Commission has sued a Montreal man who in 2012 became a fugitive after being charged in Canada with tax evasion, and accused him of securities fraud known as "scalping."

John Babikian, 26, was accused by the SEC of reaping an illegal $1.9 million profit by selling shares of a thinly traded coal mining company he touted online, without revealing he had already bought the shares.

According to the SEC complaint filed on Thursday in the U.S. District Court in Manhattan, Babikian had scalped investors by amassing America West Resources Inc shares before touting the stock on Feb. 23, 2012 through two websites he controlled, AwesomePennyStocks.com and PennyStocksUniverse.com.

The SEC said the touts contained America West's stock ticker and headlines such as "Brand new pick coming March 1st!", and caused other investors to quickly drive up the stock's price.

It said Babikian then sold nearly 1.4 million America West shares within 90 minutes of his touts for an average $1.38 per share, far above the 29 cents where the stock had been trading.

The SEC said it wants to recoup Babikian's illegal gains and freeze his assets. It said Babikian cannot be located, and is believed to hold passports from Guatemala, Lebanon and Nevis.

Canadian media last year described Babikian as a mysterious playboy who built a $100 million fortune before he vanished.

Canada has also probed Babikian. Geneviève Laurier, a spokeswoman for Revenu Québec, said that agency last year won a judgment that let it pursue millions of dollars of back taxes from Babikian, and freeze assets including a home in Laval, Québec, a Bugatti Veyron, a Bentley Continental and a BMW X6.   Continued...