Anaya Nolan
Barry Honig was charged with securities fraud and other securities laws violations in connection with MGT Capital Investments, Inc. The SEC's complaint, filed in September 2018, alleged that Honig and his associates manipulated the stock of three public companies in classic pump-and-dump schemes. Honig was also accused of manipulating the price of Riot stock by failing to disclose that he was selling the majority of his holdings in late 2017 when the price of Riot stock was skyrocketing.
| Characteristics | Values |
|---|---|
| Violation of the Securities Act of 1933 | Manipulating the stock of three public companies |
| Violation of the Securities Exchange Act of 1934 | Manipulating the stock of three public companies |
| Violation of antifraud provisions | Manipulating the stock of three public companies |
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What You'll Learn
Securities fraud
Barry Honig was charged with securities fraud and other securities law violations in connection with MGT Capital Investments, Inc. The Securities and Exchange Commission (SEC) brought an action against Honig and several other defendants, including Robert Ladd, Michael Brauser, John Stetson and John R. O'Rourke III (collectively the "Honig Group"). The SEC's complaint, filed in federal district court in Manhattan, charged the group with violating antifraud, beneficial ownership disclosure, and registration provisions of the federal securities laws.
The SEC asserted various theories of liability under the Securities Act of 1933 and the Securities Exchange Act of 1934. The court entered consent judgments enjoining Brauser, Stetson, O'Rourke, Grander, ATG, SCI and HSCI from violating the antifraud provisions of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934.
According to the SEC's complaint, Honig and his associates manipulated the stock of three public companies in classic pump-and-dump schemes. They repeatedly artificially boosted the stock price of these companies and then profited when they dumped their shares into the inflated market. In one instance, Honig was accused of manipulating the price of Riot stock by failing to disclose that he was selling the majority of his holdings in late 2017 when the price of Riot stock was skyrocketing nearly 400% in parallel with a run in the price of bitcoin.
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Violating antifraud provisions
Barry Honig was charged with violating antifraud provisions, along with John Stetson, Michael Brauser, John R. O'Rourke III, Mark Groussman, Frost, Elliot Maza, Robert Ladd, Brian Keller, John H. Ford, and several other individuals and companies. The SEC's complaint, filed in September 2018 and amended in March 2019, alleged that Honig and his associates manipulated the stock of three public companies in classic pump-and-dump schemes. The defendants artificially boosted the stock price of these companies and then profited by selling their shares into the inflated market.
Honig was also accused of securities fraud and other securities laws violations in connection with MGT Capital Investments, Inc. The SEC asserted various theories of liability under the Securities Act of 1933 and the Securities Exchange Act of 1934.
In a separate case, Honig was accused of manipulating the price of Riot Blockchain stock by failing to disclose that he was selling the majority of his holdings in late 2017 when the price of Riot stock was skyrocketing nearly 400% in parallel with a run in the price of bitcoin. However, this case was dismissed by U.S. District Judge Georgette Castner, who held that the plaintiff's claim was legally baseless.
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Manipulating stock prices
Barry Honig was accused of securities fraud and other securities laws violations in connection with MGT Capital Investments, Inc. The Securities and Exchange Commission (SEC) charged Honig and his associates with violating antifraud, beneficial ownership disclosure, and registration provisions of the federal securities laws. The SEC's complaint alleged that Honig and his associates manipulated the stock of three public companies in classic pump-and-dump schemes. They artificially boosted the stock price of these companies and then profited when they dumped their shares into the inflated market.
Honig was also accused of manipulating the price of Riot stock by failing to timely disclose that he was selling the majority of his holdings in late 2017, when the price of Riot stock was skyrocketing nearly 400% in parallel with a run in the price of bitcoin.
To manipulate stock prices, individuals or groups may engage in a variety of illegal activities. One common tactic is the pump-and-dump scheme, as allegedly employed by Honig and his associates. In this scheme, the perpetrators first artificially inflate the stock price of a company, often through coordinated buying or spreading false or misleading positive information about the company. Once the stock price has been pumped up, the perpetrators then sell (dump) their shares at a profit, taking advantage of the inflated market. This can cause the stock price to crash, leaving other investors with significant losses.
Another tactic to manipulate stock prices is through insider trading. This involves trading stocks based on material non-public information that is not available to the general public. For example, an individual may buy or sell stocks based on confidential information about a company's financial performance or upcoming news that could impact the stock price. Insider trading can provide an unfair advantage to those with access to such information and undermine the integrity of the market.
Market manipulation is another illegal practice used to manipulate stock prices. This involves activities such as spreading false or misleading information about a company, engaging in wash trades (buying and selling securities with oneself to create the appearance of market activity), or using manipulative trading strategies like spoofing (placing and cancelling orders to manipulate prices). Market manipulation can distort market prices and create an unfair playing field for investors.
To prevent stock price manipulation, regulatory bodies like the SEC actively monitor market activities and enforce securities laws. They investigate suspicious activities, bring enforcement actions, and impose penalties on those found guilty of manipulation. Additionally, companies are required to disclose material information to the public in a timely manner to ensure a level playing field for all investors.
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Violating beneficial ownership disclosure
Barry Honig was charged with violating antifraud, beneficial ownership disclosure, and registration provisions of the federal securities laws. The Securities and Exchange Commission (SEC) brought an action against Honig and his associates for securities fraud and other securities laws violations in connection with MGT Capital Investments, Inc. The SEC's complaint, filed in September 2018 and amended in March 2019, alleged that Honig and his associates manipulated the stock of three public companies in classic pump-and-dump schemes. They repeatedly artificially boosted the stock price of these companies and then profited by dumping their shares into the inflated market.
Honig and his associates were also accused of failing to disclose their beneficial ownership of the companies they were investing in. This is a violation of federal securities laws, which require investors to disclose their ownership stakes in companies they are investing in. By not disclosing their beneficial ownership, Honig and his associates were able to manipulate the stock price and profit from their investments without being detected.
The SEC's complaint sought monetary and equitable relief from Honig and his associates. The court entered consent judgments enjoining Honig and his associates from violating the antifraud provisions of the Securities Act of 1933 and the Securities Exchange Act of 1934. These judgments also enjoined Honig and his associates from violating the reporting provisions of these laws, which require investors to disclose their ownership stakes in companies.
Honig and his associates' actions had a significant impact on the companies they invested in and the stock market as a whole. By manipulating stock prices and failing to disclose their beneficial ownership, they were able to profit at the expense of other investors and the companies themselves. Their actions also undermined the integrity of the stock market and eroded trust in the financial system.
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Violating registration provisions
Barry Honig was charged with violating antifraud, beneficial ownership disclosure, and registration provisions of the federal securities laws. The Securities and Exchange Commission (SEC) brought an action against Honig and his associates for securities fraud and other securities laws violations in connection with MGT Capital Investments, Inc. The SEC asserted various theories of liability under the Securities Act of 1933 and the Securities Exchange Act of 1934.
Honig and his associates were accused of manipulating the stock of three public companies in classic pump-and-dump schemes. They repeatedly artificially boosted the stock price of these companies and then profited when they dumped their shares into the inflated market. In one instance, Honig was accused of manipulating the price of Riot stock by failing to disclose that he was selling the majority of his holdings in late 2017 when the price of Riot stock was skyrocketing nearly 400% in parallel with a run in the price of bitcoin.
Honig and his associates entered into a bifurcated settlement with the SEC in July 2019. The court entered consent judgments enjoining them from violating the antifraud provisions of Section 17 (a) of the Securities Act of 1933 and Section 10 (b) of the Securities Exchange Act of 1934, as well as the reporting provisions.
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Frequently asked questions
Barry Honig was charged with securities fraud and other securities laws violations in connection with MGT Capital Investments, Inc.
Securities fraud is a type of white-collar crime that involves the manipulation of stock prices or the use of false information to influence investment decisions.
Honig and his associates allegedly used a "pump-and-dump" scheme, where they artificially boosted the stock price of three public companies and then profited by selling their shares into the inflated market.
The SEC's complaint named several other individuals and entities as defendants, including John Stetson, Michael Brauser, John R. O'Rourke III, and Grander Holdings, Inc.
The court entered consent judgments enjoining the defendants from violating the antifraud provisions of the Securities Act of 1933 and the Securities Exchange Act of 1934.
