SEC Charges Montreal Couple in Penny Stock Scheme

July 5, 2010 - (Tip Report) Montreal - The Securities and Exchange Commission (SEC) has charged a Montreal couple in a scheme allegedly aimed at touting penny stocks. The charges were so severe the US security watchdog moved to freeze the couples assets.

The investigation is part of a U.S. government plan to police the internet for illegal manipulation of stocks that trade on the Over-The-Counter market where reporting requirements are less stringent, experts say.

The couple, Carol McKeown and Daniel F. Ryan, allegedly used their penny stock website, www.pennystockchaser.com, to hype micro cap stocks of dozens of companies, court documents show.

The website is currently offline, though a search of the cached home page as of July 2, 2010 revealed the most-recent penny stock being touted was Excel Gold Mining, Inc. (TSX-V: EGM; OTC: EGMXF) with an emphasis on the Venture Exchange trading symbol. Friday, July 2, 2010, Excel's shares closed at $0.11 on the TSX Venture Exchange with 250,000 shares changing hands. No news was released by the Company relating to the two alleged stock touts from Montreal being charged by the SEC. While no announcements displayed under Excel Gold Mining, Inc. pink sheet stock ticker, OTC trading showed a 23.5% drop in the price at the close on Friday. Excel management was not available for comment.

In a June 27th, 2010 post on the couple's website they stated: "We first alerted this stock @ .075 and the shares are up 66.67% since our alert. PSC [Penny Stock Chaser] really likes the story and we will add another 500,000 shares on Monday with a limit @ .14. A big player is hunting down stock on EGM and we think it is a sure sign of things to come. Someone has sucked up nearly millions shares of stock in the last three weeks."

The hype described in that brief paragraph at the top of Penny Stock Chaser's cached website homepage is typical of the promotional lingo McKeown and Ryan displayed on their Site - though in all fairness to Excel Gold Mining, Inc., the charges being levied against the Montreal couple - as of Friday - did not include the Company. They didn't need to, according to court documents, there were plenty of other companies the couple had touted online. The SEC says McKeown and Ryan bilked investors out of more than $2.4 million over the course of several years by touting penny stocks and then dumping shares they owned through two companies the pair controlled.

McKeown and Ryan sold shares through Downshire Capital Inc., a Quebec corporation and Meadow Vista Financial Corp., a Wyoming corporation, which received shares in companies from third-parties. The SEC says McKeown and Ryan, which are husband and wife, failed to properly disclose that ownership.

The investigation into the penny stock scheme was ran out of the SEC's Florida office where the federal government has been building upon a taskforce bent on corralling penny stock promoters who bilk investors online using unscrupulous tactics similar to what McKeown and Ryan were charged with. Sources close to the Miami Securities and Exchange Commission office say more promoters will be coming to light for their part in other penny stock promotion schemes as part of a sweeping reform to securities violations. Of note is the fact that Canadian securities regulators are cooperating with their U.S. counterpart to a greater extent than ever before in order to clean up the street of illegal market activities like that perpetrated by the Montreal couple.

The Companies mentioned in the SEC complaint were: Converge Global, Inc., (OTC: CVRG); Biocentric Energy Holdings, Inc. (OTC: BEHL); MSE Enviro-Tech Corp. (OTC: MEVT); Bluewave Group, Inc. (OTCBB: BLEW). The SEC complaint says the couple "touted at least 65 other U.S. companies in the past year" - and where "currently touting nine companies."

McKeown and Ryan used email and the social networking site, Twitter, to tout penny stocks over the course of the last year, the SEC complaint reads.

The crux of the SEC's charges are based on the Montreal couple's "fraudulent misrepresentations and omissions".

"Directly, or by virtue of controlling PennyStockChaser, McKeown, Ryan, and Downshire have made material misrepresentations and omissions concerning their activity on PennyStockChaser," item 24 on the SEC's complaint reads.

Both defendents have not admitted to any wrongdoing.

While the SEC complaint details wording used on PennyStockChaser.com disclosure information pertaining to the companies in question, the terms used to describe their promotional and trading activities were inadequate, according to the SEC. That could mean other penny stock websites will soon face the same scrutiny in what may be a nationwide clamp down on fraudulent penny stock touting activities.