(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 February 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.
U.S. District Judge Paul Crotty in Manhattan issued the freeze on Babikian’s U.S. assets, including two homes in the Los Angeles area and property in Oregon, the SEC said. The regulator also wants to recoup his illegal gains.
Babikian cannot be located, and is believed to hold passports from Guatemala, Lebanon and Nevis, the SEC said.
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.
SEC Chair Mary Jo White last year launched an agency task force to police microcap stock fraud, which she has said often targets less sophisticated investors.
America West sells low-sulfur coal to utilities. It is not a defendant and was not accused of wrongdoing in Babikian’s case.
The case is SEC v. Babikian, U.S. District Court, Southern District of New York, No. 14-01740.
Reporting by Jonathan Stempel in New York; Editing by Richard Chang