FINRA Bars Broker For Market Manipulation

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FINRA Bars Broker For Market Manipulation

FINRA barred broker George Johnson from the securities industry for operating a manipulative trading scheme to artificially inflate the market price and trading volume for the common stock of IceWEB, Inc. FINRA additionally sanctioned Christoper Wynne, Johnson’s supervisor, suspending him for two years in all capacities, barring him in a principal capacity, and fining him $25,000. Joseph Mahalick, a broker who worked with both Johnson and Wynne, was suspended for six months and fined $20,000 for falsifying firm records and has been barred from the securities industry in another action. All three worked for Meyers Associates L.P. in its Chicago branch during the time of the misconduct.

FINRA discovered that over eight days, Johnson manipulated the market for IWEB by recommending that certain of his customers buy at increasingly high and artificially inflated prices while also recommending his other customers sell their shares, often matching trades between his own customers. FINRA also found that Johnson’s motives for manipulating the stock was that he sought to acquire business from the issuer for which he would anticipate compensation in connection with a future private offering. Johnson operated a campaign with a stock promoter to try to elevate the stock’s share price to a level that would allow for the exercise of certain warrants.

Brad Bennett, FINRA’s Executive Vice President and Chief of Enforcement, said, “Any broker engaging in manipulative activity poses a threat to market integrity and has no place in the securities industry. The branch office manager, who was the first line of defense in supervising George Johnson’s activities, completely failed to supervise his transactions to ensure compliance with securities laws and FINRA rules.”

FINRA also found that Johnson and Wynne sent customers IWEB sales materials that omitted information concerning material conflicts of interest and material risks concerning IWEB’s business, and contained misleading, exaggerated and unwarranted information. Moreover, Johnson disclosed confidential information to potential purchasers concerning another offering.

In addition to the IWEB scheme, FINRA found that Johnson committed fraud by recommending that certain of his customers purchase shares of another penny stock without disclosing to them that he was liquidating his own personal positions of the security from his own brokerage accounts.

Further, FINRA discovered that to cover up Johnson’s violations of state securities registration requirements, Johnson, Mahalick and Wynne agreed to the practice of entering false information on more than 100 order memoranda, indicating that Wynne or Mahalick was responsible for the account or transactions, instead of Johnson.

If you or someone you know has lost money as a result of an investment or Ponzi scheme, please contact Richard Frankowski at 888-741-7503 to discuss your potential legal remedies or complete the contact form.

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