The Securities and Exchange Commission has once again demonstrated that its regulatory tentacles reach well beyond U.S. borders.
The regulator has obtained an emergency court order freezing the profits from an alleged $13 million international fraud involving a Seattle-area microcap company and a Barcelona stock promoter.
The SEC charged Bremerton, Washington-based GHL Technologies Inc. and its CEO Gene Hew-Len with issuing a series of false press releases touting the company’s business dealings. The commission also charged Francisco Abellan of Barcelona, Spain, with coordinating the scheme, sending glossy promotional mailers to more than 2 million U.S. recipients, and unloading more than $13 million in GHL stock on unsuspecting investors.
The SEC’s complaint charges GHL, Hew-Len, Abellan, and three foreign entities controlled by Abellan with violating the registration and antifraud provisions of the federal securities laws. It seeks preliminary and permanent injunctions, disgorgement, penalties, and other permanent and emergency relief.
At the SEC’s request, on Thursday the federal district court in Tacoma, Washington, issued an order freezing Abellan’s assets and prohibiting him from further dissipating the proceeds of the scheme — most of which, according to the SEC, he transferred to multiple bank accounts in the principality of Andorra.
“By flooding the market with misleading information while evading the disclosure requirements of the federal securities laws, these individuals raised millions of dollars over just a few days, while duped investors were left holding essentially worthless stock,” said Marc Fagel, the SEC’s San Francisco regional director.
GHL, which has been renamed NXGen Holdings, is an installer of GPS-based navigation equipment.
According to the SEC’s complaint, in early 2006, Hew-Len and Abellan arranged for GHL to issue millions of shares of stock to offshore entities designated by Abellan. In April 2006, Abellan caused the dissemination of “The Street Stock Report,” a full-color glossy mailer sent to millions of U.S. addresses urging investors to purchase the stock quickly to see huge trading profits, the SEC alleges.
Around the same time, Hew-Len issued nine press releases over a nine-week period hyping the company, the SEC states. The press releases made false claims about contracts with large customers, fraudulently touting millions of dollars in potential revenues, according to the SEC.
Following this promotional campaign, GHL’s stock price doubled and trading volume spiked nearly 1,500 percent. Abellan and his entities sold their GHL stock holdings for profits of more than $13 million. The stock, which reached a high of nearly $9 per share at the height of the scheme, now trades at under a penny.
Calls to NXGen and to Abellan’s San Francisco attorney, Craig Martin, were not returned by press time.