Cayman Islands-based broker Oliver-Barret Lindsay and California-based co-defendant Gannon Giguiere pleaded guilty to conspiracy, related to securities fraud, in US federal court.
Lindsay’s plea was filed 1 Aug. and Giguiere’s on 23 July.
A sentencing hearing for Lindsay will be held 4 Nov. in the Southern District of California. Giguiere’s hearing will be held on 28 Oct.
An April 2018 indictment describes a ‘pump-and-dump’ scheme coordinated by the men in which stocks of Kelvin Medical Inc. were sold at artificially high prices to investors.
“Generally, such schemes effected the artificial inflation in share price by, among other things, issuing news releases and promotional materials regarding the company and its stock – often containing false, misleading, or exaggerated information – and by engaging in manipulative trading of the stock to affect its price and generate the appearance of demand for the shares,” the indictment reads.
Lindsay and Giguiere are accused of facilitating this fraud by obtaining a significant block of Kelvin Medical stock and depositing the stocks in US brokerage firm KVMD, of which Giguiere was an undisclosed control person, and Cayman-based CMGT, of which Lindsay was the principal.
It was then hidden that Lindsay and Giguiere controlled and held beneficial interest in the shares.
The two then allegedly drafted corporate disclosures for Kelvin Medical that were circulated on TheMoneyStreet.com, a stock promotion website controlled by Giguiere. The indictment described Lindsay contacting securities brokers and convincing them to purchase Kelvin Medical stock in exchange for a fixed fee.
Stocks were sold by Giguiere and Linsday into the open market at inflated prices, “which the conspirators would manipulate by promoting Kelvin Medical and its stock without disclosing their plan to sell such stock during the time that the promotions were disseminated”, the indictment states.
In October 2017, Giguiere bought 1.5 million shares in Kelvin Medical stock that was deposited into a KVMD Domestic Brokerage Account a month later. He obtained an additional 1.5 million shares of Kelvin Medical stock from October to December 2017 that were deposited into a CMGT account in the name of a nominee controlled by Lindsay, the indictment explains.
From 29 Nov. 2017 until 16 Jan. 2018, Giguiere is accused of being involved in the sale of the shares from KVMD for gross proceeds of US$1.67 million. Lindsay is accused of being involved in the sale the CMGT shares from 8 Dec. 2017 until 15 March 2018 for gross proceeds of more than US$375,000.
The submitted guilty pleas do not mention two additional counts of securities fraud or a separate count of conspiracy listed in the 2018 indictment.
The two are accused in a parallel civil complaint filed by the US Securities and Exchange Commission in which they allegedly orchestrated a penny stocks scheme between December 2015 and March 2018 that netted more than US$10 million in illicit proceeds. That case is ongoing.
Lindsay’s director registration was suspended by the Cayman Islands Monetary Authority on 18 Oct. 2018.