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NEWSLETTERS & ALERTS
Stupid Is as Stupid Does with Penny Stock
by Howard Haykin
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'.