Risk & Compliance

Health Firm CEO Accused of Phony Promotions

The SEC says the head of Empowered Products hid behind an alias to recommend to investors that they buy the penny stock.
Matthew HellerSeptember 7, 2016

The CEO of a sexual health products company has been charged with running phony promotional campaigns in which he recommended that investors buy the penny stock without disclosing he had prepared and distributed the articles.

The U.S. Securities and Exchange Commission said Empowered Products CEO Scott S. Fraser used his own newsletter publishing company, Contrarian Press, and a paid promoter, to tout the stock, sometimes writing the ads himself under the alias “Charlie Buck.”

“I have known the founder, president, and CEO of Empowered Products, Scott Fraser, for many years and I’ve watched the company grow from a small, private entity nine years ago to a rapidly emerging publicly traded corporation today,” Fraser, allegedly disguised as Buck, wrote in one September 2011 newsletter.

Both Fraser and the paid promoter, Nathan Yeung, were named as defendants in a civil fraud complaint filed Monday by the SEC.

“When promoters fail to disclose their relationship with a company they’re touting, they give investors a false impression that an investment recommendation is objective,” Andrew M. Calamari, director of the SEC’s New York regional office, said in a news release. “We allege that Fraser and Yeung deliberately touted Empowered Products without disclosing the company’s involvement with the promotions.”

Fraser was already in the publishing business when he founded Empowered Products in around 2002. According to the SEC, the company hired Contrarian Press as a $14,500-a-month consultant as soon as it went public through a reverse merger in July 2011.

The first promotional campaign allegedly began two months later with the “Stock-Profit Guide,” a newsletter issued by Contrarian Press and purportedly written by Charlie Buck. “I believe Empowered Products has all the pieces in-place to merit a buy recommendation at this early stage,” it concluded.

During the first month that the campaign ran, the SEC said, Empowered’s average daily trading volume increased 240%. During a May 2012 promotion, there was a 1,400% increase in volume.

The SEC said Fraser’s collaboration with Yeung began in the summer of 2012 and involved Yeung hiring stock promoters to distribute materials about Empowered that he authored under the pseudonym “Mason Zhang.”