UPDATE 1-U.S. SEC sues Canadian fugitive for 'scalping' investors

Thu Mar 13, 2014 3:59pm EDT
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* John Babikian said to own multiple homes, luxury cars

* SEC targeting "scourge" of microcap fraud

By Jonathan Stempel

March 13 (Reuters) - The U.S. Securities and Exchange Commission has sued and won an asset freeze against 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, and planned to sell them after his touts boosted their price.

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 is "intensely focused on the scourge of microcap fraud and is aggressively working to root out microcap fraudsters who make their living by preying on unwitting investors," SEC enforcement chief Andrew Ceresney said.   Continued...