U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 23224 / March 27, 2015
Securities and Exchange Commission v. Michael J. Ling, Civil Action No. 15-cv-02179
SEC Charges Day-Trader with Manipulating Stock Prices in Order to Obtain NASDAQ Listing for Company
The Securities and Exchange Commission today announced charges against a New Jersey-based day-trader who allegedly manipulated the securities of a microcap company in order to drive-up and maintain the company's stock price above the minimum price required for listing on a national exchange. According to the SEC, apart from helping the company get listed on the exchange, the day-trader also profited from his scheme by more than $650,000.
The SEC alleges that Michael J. Ling repeatedly engaged in marking-the-close trades and entered into matched trades in shares of Cyberdefender Corp., a now-defunct computer software company, in order to maintain the price of the microcap company at or above $4.00 per share over the period September 2009 through June 2010. Maintaining a closing bid price at $4.00 per share or higher for 90 consecutive trading days prior to application was a prerequisite for listing on the Nasdaq Capital Market. Marking-the-close is the practice of attempting to influence the closing price of a stock by executing orders at or near the close of the market. A matched trade occurs when an order for the purchase (or sale) of a security is entered with the knowledge that a substantially similar order for the sale (or purchase) of the security has been or will be entered.
According to the SEC's complaint filed in the U.S. District Court for the District of New Jersey, over a period of 144 trading days, Ling traded in Cyberdefender Corp. stock on 127 days, and on 54 of those 127 days, Ling traded in the final fifteen minutes of the trading day. Further, Ling was the last trade of the day, and thus set the closing price, on 48 days. Ling also engaged in 23 matched trades that were coordinated with an acquaintance.
The Commission alleges that Ling profited from his scheme by more than $650,000, mainly by exercising warrants he received at bargain prices. After the manipulation concluded, Cyberdefender's share price slowly fell, leaving unsuspecting shareholders who purchased at elevated prices with a loss.
The SEC's complaint alleges that Ling violated Sections 17(a)(1) and 17(a)(3) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rules 10b-5(a) and 10b-5(c) thereunder.
The Commission's investigation has been conducted by William Finkel, and Thomas P. Smith, Jr. of the New York Regional Office, with assistance from Joseph Darragh of the Commission's Microcap Fraud Task Force. The litigation will be led by David Stoelting. The case is being supervised by Sanjay Wadhwa.