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Stupid Is as Stupid Does with Penny Stock

September 25, 2017

by Howard Haykin


The SEC charges a California-based CPA with insider trading ahead of acquisition offer of a 'penny stock'. 


The SEC today charged Certified Public Accountant Justin Cary with insider trading ahead of an acquisition offer for an advertising technology company.


BACKGROUND.    Cary, 35, a resident of San Juan Capistrano, CA, has been a California-licensed CPA since 2009. In his accounting career, Cary has worked as both an outside auditor and an in-house accountant. From September 2013 to present, Cary has been a consultant for NOW CFO, LLC, an accounting outsourcing firm. In addition, from July 2015 to the present, Cary has been the CFO, COO, and a member of the board of directors for Praxsyn Corp., whose common stock is publicly-traded and registered with the SEC. [Shares trade <$0.01.]


SEC FINDINGS.    On 1/28/16, while serving as an accounting consultant for Adaptive Medias, Inc., Cary received an internal email from the company's controller about a soon-to-be-issued press release announcing that the company had received an acquisition offer of $1.50 per share. At the time, company stock was trading at only $0.16 per share. Six minutes after receiving the email, Cary logged on to his personal online brokerage account and purchased 18,500 shares of Adaptive Medias stock - at a cost of $2,880.


Four days later, on February 1, when the acquisition offer was announced, the price of Adaptive Medias shares jumped 428% over the prior day, and closed at $0.74 per share. Cary sold all of his shares, generating $8,140.25 in illicit profits.


The SEC seeks disgorgement of Cary’s ill-gotten gains, a civil penalty, and an officer-and-director bar.


FINANCIALISH TAKE AWAY.    In  this day and age of technology, Penny stocks no longer operate under the radar - and regulators barely "break a sweat" in their efforts to detect large or unusual trading activity following major corporate announcements. While Mr. Cary may know his "debits and credits," he proved "wet behind the ears" - perhaps a reflection of his relative inexperience (having been certified for only 6 or 7 years) and his inability to resist the temptation of making an 'easy buck'.