SEC Files Action To Stop Ongoing Microcap Stock Fraud

Press Release, Sep 20, 2006

The Securities and Exchange Commission today filed an emergency enforcement action in federal court charging two New York men, Faisal Zafar and Sameer Thawani, with perpetrating an ongoing securities fraud over the Internet. The complaint alleges that since late 2004 and as recently as March 2006, Zafar and Thawani have engaged in a "pump and dump" scheme to manipulate the market for at least 24 thinly traded "microcap" or "smallcap" stocks. The defendants made over $873,000 by purchasing the stocks, anonymously disseminating false information about the companies on popular Internet message boards, and then selling the stocks at artificially inflated prices.

To deceive investors into buying these stocks, the defendants have preyed on public fears about terrorism and international health epidemics, among other topics. For example, after the London subway bombings and reports concerning a deadly "bird flu" virus, Zafar posted messages falsely stating that one issuer was receiving a contract from the Department of Homeland Security to improve security on New York City subways, and that another issuer was acquiring a company that produces "bird flu" vaccine.

Acting on the Commission's application for emergency relief, the United States District Court for the Eastern District of New York issued a temporary restraining order that, among other things, froze the defendants' assets and set a date for a hearing on the Commission's motion for entry of a preliminary injunction against further violations and other relief while the action is pending. Read more at sec.gov