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Canadians Michael Taxon, Itamar Cohen admit to $17M stock fraud

Two Toronto-area men have admitted to fraudulently manipulating the prices of two U.S. penny stocks in order to unlawfully make $17 million in trading profits for themselves and others.

Two Toronto-area men have admitted to fraudulently manipulating the prices of two U.S. penny stocks in order to unlawfully make $17 million in trading profits for themselves and others.

Michael Taxon and Itamar Cohen, both 52 and from Toronto and Thornhill, respectively, have reached a deal with the Securities and Exchange Commission and the U.S. Attorney's Office for masterminding a scam in which retail investors were duped into buying stock in a scheme known as a "pump and dump."

(Cohen is not to be confused with another man — bearing the same name and also from Thornhill, Ont. — who is a prominent local lawyer and head of the Itamar Cohen Israeli Law Office.)

According to the U.S. Attorney's Office, the two men and other unnamed co-conspirators bought up large chunks of two stocks — Raven Gold Corporation and Kentucky USA Energy Inc. — between April 2007 and June 2008.

"They then 'pumped' the price of those shares by engaging in manipulative trading of the stocks and disseminating misleading promotional materials touting the stocks and encouraging others to purchase them," the Attorney's office said. "After pumping the stocks, Taxon and Cohen 'dumped' them, selling large volumes of the stocks to duped investors. The target companies' stock price would then drop, resulting in losses to the victims."

American authorities say the scheme generated approximately $17.2 million in illegal proceeds, of which Taxon and Cohen received approximately $2.4 million. Both men have pleaded guilty to two counts of conspiracy to commit securities fraud, each of which carries a maximum potential penalty of five years in prison and a $250,000 fine, or twice the gain or loss from the offence.

Sentencing for both Taxon and Cohen is scheduled for Sept. 2, 2015. Both men will also pay monetary penalties associated with the SEC charges and will be banned from participating in penny stock offerings. U.S. Attorney Paul Fishman thanked multiple agencies including the SEC, the FBI and the U.S. Attorney's office for collaborating on the file.

Clarifications

  • The Itamar Cohen named in this story should not be confused with another Thornhill, Ont. resident of the same name who is a prominent local lawyer and head of the Itamar Cohen Israeli Law Office.
    Jun 10, 2015 11:04 AM ET

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