U.S. regulators say the hoax that whipsawed Avon Products last month was hatched by a man in Bulgaria who had fooled Wall Street twice before with similar ruses.
Avon shares surged 20 percent May 14 after a regulatory filing purported to show a bid three times Avon’s stock price. Avon said there was no such offer, and the stock fell to earth.
Nedko Nedev, 37, hoodwinked the stock market from Sofia, the SEC said. Over the past three years, he allegedly did the same thing with Tower Group International and Rocky Mountain Chocolate Factory. Each time, he bought shares just before sham entities filed fake takeover announcements on the Securities and Exchange Commission’s public filing system, the regulator said.
The Avon release contained typos, extra spaces and even two different names for the faux-private equity firm, PTG Capital Partners. Still, Nedev managed to make $5,000 off the scheme, according to the SEC.
“It is highly unlikely that Nedev’s trading was mere coincidence,” the agency said in a lawsuit filed Thursday in Manhattan federal court. “There is no indication that PTG Capital is a legitimate company organized for any other reason than the stock manipulation.”
The SEC described a more sophisticated scam than many at first suspected.
On May 14, PTG Capital filed a dummy release claiming to have made a tender offer for Avon, and volume in the beauty products company spiked 448 percent in one day. PTG, which “to the extent it actually exists,” had gained access to the SEC’s EDGAR system around April 21, the agency said.
Almost exactly a year earlier, on May 13, 2014, an entity called Euroins Insurance Group issued a bogus release claiming it had offered to buy Tower Group, sending shares surging 32 percent, the agency said.
And on Dec. 28, 2012, a firm calling itself PST Capital announced what turned to be a make-believe offer for Rocky Mountain Chocolate, and its shares jumped 23 percent after the close of trading, the SEC said.
Nedev was behind them all, the SEC claimed.
He earned $23,368 on the Tower Group “offer,” it said.
Nedev “or others working with him attempted to manipulate the equity price” by issuing “fraudulent tender offers or press releases,” according to the complaint.
Neither Nedev nor a lawyer for him or the firms could be immediately located for comment. A voicemail left with Tower Group after normal business wasn’t immediately returned.
The SEC, which alleged violations of federal securities laws, obtained an emergency freeze on two U.S. brokerage accounts connected to the alleged schemes, said Andrew Ceresney, head of the SEC’s Enforcement Division.