Risk & Compliance

SEC Charges Canadian With Microcap Fraud

Philip Kueber allegedly hid his control of a company whose market value soared to more than $6 billion before regulators suspended trading.
Matthew HellerAugust 3, 2015

The U.S. Securities and Exchange Commission has charged a Canadian citizen with orchestrating a securities fraud involving a microcap company whose market value soared to more than $6 billion before regulators suspended trading a year ago.

Philip Thomas Kueber enlisted a small group of straw shareholders and sham CEOs to conceal his control of purportedly non-restricted shares in Cynk Technology Corp., the SEC said in a complaint filed Friday. The straw investors were mainly Kueber’s family members and associates in British Columbia and California, the complaint alleges.

Cynk’s market value topped $6 billion on July 10, 2014, as the stock reached an intraday high of $21.95. The SEC suspended trading the following day, citing concerns about the accuracy of disclosures and potentially manipulative transactions.

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Due to the trading suspension, the SEC said Friday, Kueber was unable to profit on the gains from the stock’s rise from less than 10 cents per share. Once trading resumed, the share price fell, closing at 60 cents on July 28, 2014.

“We allege that Kueber used straw shareholders, offshore dummy corporations, and puppet corporate officers to gain and conceal control over the majority of Cynk shares,” Michael Paley, co-chair of the SEC Enforcement Division’s Microcap Fraud Task Force, said in a news release.

“Law enforcement has again pierced through the layers of deceit to hold an alleged wrongdoer accountable, in this case before he could liquidate his shares in the open market and realize ill-gotten profits,” he added.

According to Bloomberg, Cynk, formerly known as Introbuzz, listed offices in Belize but had no assets, no revenue and one employee. It began trading in 2013 for a few cents a share, staying in that range until June 17, 2014, when it spiked to $2.25, a gain of 3,650%.

The SEC complaint alleges the straw shareholders never received the shares they “purchased” and that Kueber transferred the shares to brokerage accounts and offshore shell companies he secretly controlled, misleading broker-dealers about his ownership to create the false appearance of a company with publicly held shares.