SEC Charges Securities Professionals and Traders in International Hedge Fund Portfolio Pumping Scheme
summary
Florian Homm, Todd M. Ficeto, and Colin Heatherington orchestrated a cross-border microcap stock manipulation scheme from 2005 to 2007 through Hunter World Markets, artificially inflating stock prices via matched orders and wash sales to generate $63M in illicit profits and falsely overstate hedge fund NAVs by $440M, leading to SEC charges, disgorgement demands, and permanent bans.
paragraph
The SEC charged Florian Homm, Todd M. Ficeto, and Colin Heatherington, along with their firms Hunter World Markets Inc. (HWM) and Hunter Advisors LLC, with securities fraud for manipulating U.S. microcap stocks between September 2005 and September 2007. Using matched orders, wash sales, and close-marking techniques, they inflated stock prices and sold shares to offshore hedge funds controlled by Homm, generating over $63 million in illicit proceeds and falsely overstating hedge fund net asset values by at least $440 million through portfolio pumping. The SEC seeks disgorgement, prejudgment interest, financial penalties, and permanent bans against the primary defendants, while HWM trader Tony Ahn and compliance officer Elizabeth Pagliarini settled for $40,000 and $20,000 penalties respectively, along with industry bars.
narrative
Between September 2005 and September 2007, Florian Homm, Todd M. Ficeto, and Colin Heatherington orchestrated a sophisticated cross-border securities fraud scheme centered on U.S. microcap stocks through their Beverly Hills-based broker-dealer, Hunter World Markets Inc. (HWM), and Ficeto’s affiliated firm, Hunter Advisors LLC. They artificially inflated stock prices using matched orders, wash sales, and close-marking techniques, then sold the manipulated shares to offshore hedge funds controlled by Homm, generating over $63 million in illicit profits from sales, commissions, and credits. This manipulation enabled Homm to fraudulently overstate the net asset values of those hedge funds by at least $440 million—a practice known as 'portfolio pumping'—to mislead investors and enhance fund performance reports. The conspirators communicated via secret instant messaging systems to evade detection, coordinating with traders at Absolute Capital Management Holdings Limited to execute manipulative trades. HWM and Ficeto were additionally charged with violating broker-dealer recordkeeping rules, while HWM trader Tony Ahn and former chief compliance officer Elizabeth Pagliarini settled without admitting guilt, paying $40,000 and $20,000 penalties respectively and accepting industry bars. The SEC is seeking permanent injunctions, disgorgement of all illicit gains with interest, and financial penalties against Homm, Ficeto, and Heatherington, including permanent bans from participating in penny stock offerings or serving as corporate officers. The investigation was conducted with assistance from the British Columbia Securities Commission and FINRA.
Classified pump-and-dump(confidence 100%). EDGAR detection: forms S-8/S-1/424B/8-K· recall 69% / precision 12%. detection rule →
Statutes
Parties
absolute capital management holdings limitedcolin heatheringtonflorian hommhunter advisors llchunter world markets inc.scheme participantsSecurities and Exchange Commissionstock manipulation schemestock price manipulationtodd m. ficetotony ahn
Keywords
sechedge fundsficetohedgehommhwmsecuritiesschemefundssecurities professionalshedge fundportfolio pumpingficeto hommangeles regionalstock
Exhibits & Attached Documents (2)
Extracted insights
Dollar amounts 4
- $440.00M $440 million $100M–$1B
- $63.00M $63 million $10M–$100M
- $40K $40,000 $10K–$100K
- $20K $20,000 $10K–$100K
Entities 11
- company absolute capital management holdings limited
- person colin heatherington
- person florian homm
- company hunter advisors llc
- company hunter world markets inc.
- person scheme participants
- agency Securities and Exchange Commission
- person stock manipulation scheme
- person stock price manipulation
- person todd m. ficeto
- person tony ahn
Triples 16
- SEC charged Florian Homm, Todd M. Ficeto, Colin Heatherington, Hunter World Markets Inc., and Hunter Advisors LLC
- Florian Homm conducted scheme through Hunter World Markets Inc.
- Todd M. Ficeto conducted scheme through Hunter World Markets Inc.
- Colin Heatherington assisted in scheme stock price manipulation
- Florian Homm and Todd M. Ficeto generated $63 million in illicit proceeds
- Scheme participants manipulated U.S. microcap stocks
- Homm overstated hedge funds' performance by at least $440 million
- Scheme conducted from September 2005 to September 2007
- Ficeto and Homm co-owned Hunter World Markets Inc.
- Ficeto controlled Hunter Advisors LLC
- Traders at HWM and ACMH exchanged hundreds of instant messages on secret messaging system
- Absolute Capital Management Holdings Limited participated in stock manipulation scheme
- Tony Ahn placed matched orders and wash sales
- Colin Heatherington instructed placement of matched orders and wash sales
- Defendants violated antifraud provisions of federal securities laws
- Hunter World Markets Inc. and Todd M. Ficeto violated broker-dealer recordkeeping provisions
PDF (from attached: pdf)
Text layers
Extracted body text (5,371c)
SEC Charges Securities Professionals and Traders in International Hedge Fund Portfolio Pumping Scheme FOR IMMEDIATE RELEASE 2011-51 Washington, D.C., Feb. 24, 2011 – The Securities and Exchange Commission today charged two securities professionals, a hedge fund trader, and two firms involved in a scheme that manipulated several U.S. microcap stocks and generated more than $63 million in illicit proceeds through stock sales, commissions and sales credits. The SEC alleges that Florian Homm of Spain and Todd M. Ficeto of Malibu, Calif., conducted the scheme through their Beverly Hills, Calif.-based broker-dealer Hunter World Markets Inc. (HWM) with the assistance of Homm’s close associate Colin Heatherington, a trader who lives in Canada. They brought microcap companies public through reverse mergers and manipulated upwards the stock prices of these thinly-traded stocks before selling their shares at inflated prices to eight offshore hedge funds controlled by Homm. Their manipulation of the stock prices allowed Homm to materially overstate by at least $440 million the hedge funds’ performance and net asset values (NAVs) in a fraudulent practice known as “portfolio pumping.” The SEC additionally brought administrative proceedings against HWM’s trader and chief compliance officer, who each agreed to settle the SEC’s charges against them. Additional Materials SEC Complaint Litigation Release No. 21865 SEC Administrative Proceeding Against Tony Ahn SEC Administrative Proceeding Against Elizabeth Pagliarini “Ficeto and Homm repeatedly abused their positions as securities industry professionals to commit a wide-ranging, cross-border fraudulent scheme,” said Rosalind R. Tyson, Director of the SEC’s Los Angeles Regional Office. “By manipulating U.S. stocks through a U.S. broker-dealer, they defrauded investors in offshore hedge funds and reaped millions of dollars from their illicit activities.” According to the SEC’s complaint filed in the U.S. District Court for the Central District of California, Homm along with Ficeto and Heatherington conducted the scheme from September 2005 to September 2007. Homm misused the assets of the hedge funds to allow him, Ficeto, Heatherington and HWM to manipulate upwards the prices of the U.S. microcap stocks in which the hedge funds held a position. They used a number of classic manipulative techniques such as placing matched orders, placing orders that marked the close or otherwise set the closing price for the day, and conducting wash sales. This manipulation enabled Ficeto, Homm and Heatherington to generate enormous profits through Ficeto’s and Homm’s co-ownership of HWM and their sale of the microcap stock shares to the hedge funds at inflated prices. Ficeto garnered further illicit profits through his control of Hunter Advisors, LLC, which directed the investment activities of a “fund of funds” that also participated in the stock manipulation. The SEC’s complaint alleges that the principal traders at HWM and the London-based hedge funds manager Absolute Capital Management Holdings Limited (ACMH) exchanged hundreds of instant messages (IMs) that were recorded on a secret, alternate messaging system that allowed them to communicate freely without fear that their scheme would be detected by the SEC. As reflected in those secret IM messages, ACMH’s trader (typically Heatherington) under Homm’s direction would instruct Ficeto or HWM’s trader (Tony Ahn) acting under Ficeto’s direction to place matched orders, transactions that marked the close, or wash sales for the purpose of artificially raising or stabilizing the microcap stock prices. The SEC’s complaint charges Ficeto, Homm, Heatherington, HWM, and Hunter Advisors LLC with violating the antifraud provisions of the federal securities laws, and additionally charges HWM and Ficeto with violations of several broker-dealer recordkeeping provisions. The SEC seeks permanent injunctive relief, disgorgement of illicit profits with prejudgment interest, and financial penalties. The SEC also seeks an order permanently barring Ficeto from participating in any penny stock offering or from serving as an officer or director of a public company. The SEC instituted separate but related administrative proceedings against Ahn and HWM’s former chief compliance officer Elizabeth Pagliarini, who each agreed to settle their cases without admitting or denying the SEC’s findings. Ahn agreed to pay a $40,000 penalty, comply with certain undertakings, and be barred from association with a broker and dealer for five years. Pagliarini agreed to a $20,000 penalty and one-year suspension as a supervisor with a broker or dealer. Lucee Kirka, Rhoda Chang, Marc Blau, and Diana Tani conducted the SEC’s investigation, and Donald Searles will lead the SEC’s litigation efforts. The SEC acknowledges the assistance of the British Columbia Securities Commission as well as the Financial Industry Regulatory Authority. # # # For more information about this enforcement action, contact: Michele Wein Layne Associate Regional Director, SEC Los Angeles Regional Office (323) 965-3850 Marc J. Blau Assistant Regional Director, SEC Los Angeles Regional Office (323) 965-3975 Donald Searles Senior Trial Counsel, SEC Los Angeles Regional Office (323) 965-4573 http://www.sec.gov/news/press/2011/2011-51.htm Home | Previous Page Modified: 02/24/2011
OCR text (5,371c · plain-text · 99% conf)
SEC Charges Securities Professionals and Traders in International Hedge Fund Portfolio Pumping Scheme FOR IMMEDIATE RELEASE 2011-51 Washington, D.C., Feb. 24, 2011 – The Securities and Exchange Commission today charged two securities professionals, a hedge fund trader, and two firms involved in a scheme that manipulated several U.S. microcap stocks and generated more than $63 million in illicit proceeds through stock sales, commissions and sales credits. The SEC alleges that Florian Homm of Spain and Todd M. Ficeto of Malibu, Calif., conducted the scheme through their Beverly Hills, Calif.-based broker-dealer Hunter World Markets Inc. (HWM) with the assistance of Homm’s close associate Colin Heatherington, a trader who lives in Canada. They brought microcap companies public through reverse mergers and manipulated upwards the stock prices of these thinly-traded stocks before selling their shares at inflated prices to eight offshore hedge funds controlled by Homm. Their manipulation of the stock prices allowed Homm to materially overstate by at least $440 million the hedge funds’ performance and net asset values (NAVs) in a fraudulent practice known as “portfolio pumping.” The SEC additionally brought administrative proceedings against HWM’s trader and chief compliance officer, who each agreed to settle the SEC’s charges against them. Additional Materials SEC Complaint Litigation Release No. 21865 SEC Administrative Proceeding Against Tony Ahn SEC Administrative Proceeding Against Elizabeth Pagliarini “Ficeto and Homm repeatedly abused their positions as securities industry professionals to commit a wide-ranging, cross-border fraudulent scheme,” said Rosalind R. Tyson, Director of the SEC’s Los Angeles Regional Office. “By manipulating U.S. stocks through a U.S. broker-dealer, they defrauded investors in offshore hedge funds and reaped millions of dollars from their illicit activities.” According to the SEC’s complaint filed in the U.S. District Court for the Central District of California, Homm along with Ficeto and Heatherington conducted the scheme from September 2005 to September 2007. Homm misused the assets of the hedge funds to allow him, Ficeto, Heatherington and HWM to manipulate upwards the prices of the U.S. microcap stocks in which the hedge funds held a position. They used a number of classic manipulative techniques such as placing matched orders, placing orders that marked the close or otherwise set the closing price for the day, and conducting wash sales. This manipulation enabled Ficeto, Homm and Heatherington to generate enormous profits through Ficeto’s and Homm’s co-ownership of HWM and their sale of the microcap stock shares to the hedge funds at inflated prices. Ficeto garnered further illicit profits through his control of Hunter Advisors, LLC, which directed the investment activities of a “fund of funds” that also participated in the stock manipulation. The SEC’s complaint alleges that the principal traders at HWM and the London-based hedge funds manager Absolute Capital Management Holdings Limited (ACMH) exchanged hundreds of instant messages (IMs) that were recorded on a secret, alternate messaging system that allowed them to communicate freely without fear that their scheme would be detected by the SEC. As reflected in those secret IM messages, ACMH’s trader (typically Heatherington) under Homm’s direction would instruct Ficeto or HWM’s trader (Tony Ahn) acting under Ficeto’s direction to place matched orders, transactions that marked the close, or wash sales for the purpose of artificially raising or stabilizing the microcap stock prices. The SEC’s complaint charges Ficeto, Homm, Heatherington, HWM, and Hunter Advisors LLC with violating the antifraud provisions of the federal securities laws, and additionally charges HWM and Ficeto with violations of several broker-dealer recordkeeping provisions. The SEC seeks permanent injunctive relief, disgorgement of illicit profits with prejudgment interest, and financial penalties. The SEC also seeks an order permanently barring Ficeto from participating in any penny stock offering or from serving as an officer or director of a public company. The SEC instituted separate but related administrative proceedings against Ahn and HWM’s former chief compliance officer Elizabeth Pagliarini, who each agreed to settle their cases without admitting or denying the SEC’s findings. Ahn agreed to pay a $40,000 penalty, comply with certain undertakings, and be barred from association with a broker and dealer for five years. Pagliarini agreed to a $20,000 penalty and one-year suspension as a supervisor with a broker or dealer. Lucee Kirka, Rhoda Chang, Marc Blau, and Diana Tani conducted the SEC’s investigation, and Donald Searles will lead the SEC’s litigation efforts. The SEC acknowledges the assistance of the British Columbia Securities Commission as well as the Financial Industry Regulatory Authority. # # # For more information about this enforcement action, contact: Michele Wein Layne Associate Regional Director, SEC Los Angeles Regional Office (323) 965-3850 Marc J. Blau Assistant Regional Director, SEC Los Angeles Regional Office (323) 965-3975 Donald Searles Senior Trial Counsel, SEC Los Angeles Regional Office (323) 965-4573 http://www.sec.gov/news/press/2011/2011-51.htm Home | Previous Page Modified: 02/24/2011