The SEC charged a Beverly Hills broker-dealer, along with its owners, trader and CCO, and other persons and firms for their roles in a manipulation scheme that generated over $63 million in illicit proceeds.   Named in the complaint are:

Florian Homm of Spain and Todd M. Ficeto of Malibu, Calif., who conducted the scheme through their Beverly Hills, CA-based broker-dealer Hunter World Markets Inc. with the assistance of Homm’s close associate Colin Heatherington, a trader living in Canada. 

Administrative proceedings were brought against trader Tony Ahn and CCO Elizabeth Pagliarini at Hunter World Markets, each of whom agreed to settle the SEC’s charges against them.  Ahn agreed to a $40K penalty, to cooperate, and to a 5-year bar from the industry.  Pagliarini agreed to a $20K penalty and a one-year suspension as a supervisor with a broker or dealer.

According to the SEC, the defendants brought microcap companies public through reverse mergers and pumped up the prices of these thinly-traded stocks before dumping their shares at inflated prices to 8 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."

    Additional Details.   "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."  -- Rosalind Tyson, Director of the SEC’s L.A. Regional Office.  

Here's how they did it:

• Homm, 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 Hunter World 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 - e.g., placing matched orders, placing orders that marked the close or otherwise set the closing price for the day, and conducting wash sales.
• Ficeto, Homm and Heatherington generated enormous profits through Ficeto’s and Homm’s co-ownership of Hunter World, 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.

    Hundreds of IM's Recorded.   The SEC’s further alleges that the principal traders at Hunter World and London-based hedge funds manager Absolute Capital Management Holdings Limited exchanged hundreds of IMs that were recorded on a secret, alternate messaging system enabling them to communicate freely without fear that their scheme would be detected by the SEC.  As reflected in those secret IM messages, Absolute'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.

SEC Staff Credits.   Lucee Kirka, Rhoda Chang, Marc Blau, Diana Tani conducted the SEC’s investigation;  Donald Searles will lead the SEC’s litigation efforts. 

For complete details, go to:    [SEC PR 11-51, 2/24]