SEC Continues Microcap Fraud Crackdown

The SEC announced the latest actions in its microcap fraud-fighting initiative, better known as "Operation Shell-Expel," suspending trading in 255 dormant shell companies "ripe for abuse" in the over-the-counter ("OTC") market. Operation Shell-Expel is a pump-and-dump scheme in which perpetrators tout a thinly traded microcap stock through false and misleading statements about the company to the marketplace. After purchasing the stock at a low price and pumping the price higher by creating the appearance of market activity, individuals dump the stock to make significant profits by selling it into the market at the higher price.

The SEC began its effort to clean up the microcap marketplace in 2012 and focused on scrutinizing penny stocks nationwide and identifying clearly inactive companies. This effort enabled the SEC proactively to suspend trading in several hundred dormant shell companies before fraudsters had an opportunity to manipulate them.

See: Trading Suspension Order Listing 255 Companies; Press Release.