05.08.09
The SEC Encourages Pornography & Stock Manipulation
The SEC Enforcement Division just published a press release about a ’successful’ enforcement action in regards to stock manipulation of former penny stock Exotics.com (a pornography purveyor). The sad thing is that the press release once again highlights not the SEC Enforcement Division’s success but rather its complete and total failure. The gist of the release is that one of the alleged involved stock manipulators made $156,870.92 in illicit profits and his punishment is promising to never be a bad boy again and paying only $20,000 in fines (having few assets because he already spent his ill-gotten gains).
I don’t know how other people think, but if I were to make $156,870.92 in a penny stock manipulation scheme and then be fined only $20,000 by the SEC because I had already spent all the money, I would not feel very punished. In fact, I would not be dissuaded at all from participating in future stock manipulation. If I were a con man who had not previously engaged in stock manipulation and I saw this information, I would drop whatever I was doing and get into stock fraud because even if a perpetrator is caught their punishment is light and they usually end up better off than they were before the fraud.
A note to the SEC Enforcement division: for a punishment to deter offenders, they must actually be punished; in other words, they must be made worse off than before they committed the crime. How about fining them for three times the amount they stole and then hounding them for payment for the rest of their lives? Giving prison sentences would also be nice.
Disclosure: No positions. I have never been fined or sanctioned by the SEC or any other regulatory agency for anything.