SEC Sues Bulgarian and Others for Bogus Bids

Tender offers for Avon Products, Rocky Mountain Chocolate Factory, and Tower Group were designed to fraudulently drive up share prices.
Katie Kuehner-HebertJune 4, 2015

The U.S. Securities and Exchange Commission Thursday filed a lawsuit against Nedko Nedev, 37, of Sofia, Bulgaria, a firm called PST Capital Group, and others for submitting bogus tender offers for Avon Products, Rocky Mountain Chocolate Factory, and Tower Group, to fraudulently drive up the stock prices and then sell their shares, according to a Reuters article Thursday.

On May 14, a firm calling itself PTG Capital Partners falsely claimed that it had offered to buy Avon for $18.75 per share, a 181% premium, causing the cosmetics company’s stock price to shoot up 20% in intraday trading. The SEC’s lawsuit alleges that Nedev made tens of thousands of dollars through the manipulation, Reuters said.

In December 2012, London-based PST Capital Group made a bogus tender offer for Rocky Mountain for a 27% premium, causing its shares to rise 4.6%, according to the SEC claim. And in May 2014, Euroins Insurance, also from Sofia, falsely claimed it had offered to buy Tower Group, causing that company’s shares to rise 32%.

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Nedev and others filed the false tenders on the SEC’s public Edgar database and issued fake press releases.

The SEC said Nedev owned Avon, Rocky Mountain, and Tower securities through a Sofia brokerage account before the bogus bids were made.

The SEC is seeking civil penalties and to recoup illegal profits from Nedev and the other defendants, including alleged brokerage entities in Nevada and the British Virgin Islands whose accounts were accessed from Sofia to make the suspect trades, according to Reuters.