Securities: SEC charges registered broker with pump and dump scheme.

The SEC alleges that Ballas, a registered representative of New York stock brokerage firm Global Arena Capital Corporation, purported to announce good news regarding the companies, including that Google was buying one of them at a substantial premium. Ballas then posed as an investor on Internet message boards, touting the announcements he had fabricated. In one instance, his scheme caused the stock price to increase by nearly 80 percent within a few hours after his phony press release was issued.

The SEC began its action three weeks into the scheme.

Marc Fagel, Director of the SEC’s San Francisco Regional Office, said "Ballas caused significant market disruption with his hoaxes, forcing companies to scramble to correct the public record."

But what really concerns market regulators is that Ballas is part of the establishment, not an opportunist criminal unconnected with the market. Manipulation is bad enough, but undermining the reputation of the securities industry itself is worse, says Fagel "The scheme is all the more disturbing and warranting of this swift SEC action because Ballas is an industry professional responsible for handling his customers’ brokerage accounts."

In documents filed with the San Jose, California, Federal Court, the SEC alleges:

• Ballas issued a phony press release the evening of 29 Sept., 2009, announcing that Pennsylvania biotech company Discovery Laboratories had obtained approval from the U.S. Food and Drug Administration for a drug under development. Ballas then posted a message on a stock message board with a link to what he described as the company’s “official press release.” In his post, Ballas claimed to have called his “personal broker” who “says it’s been confirmed.” The next morning, Discovery Laboratories shares opened significantly higher.
• The next day, Ballas issued another press release falsely claiming that IMAX Corporation had been acquired by Disney. Once again, he followed up by posting links to the phony release on a stock message board, telling other potential investors that he had bought 10,000 IMAX shares and that his broker “just called me to tell me at the crack of dawn."
• Ballas continued his scheme on October 1, issuing a phony press release stating that California search engine company Local.com was being acquired by Microsoft. Ballas again followed up by posting messages and links to the Local.com release on stock message boards. In one posting he stated: “Local just bought out by Microsoft, at $12.50 per share including patent ownership.” In after-market trading, Local.com’s stock price rose nearly 80 percent.
• Later that night, Local.com issued a corrective release saying that the Microsoft release had been false — there was no Microsoft acquisition. Undeterred, the next day Ballas issued another phony release, this time stating that it was Google, and not Microsoft, that was acquiring the company.

He is also accused of a bizarre form of insider trading: he allegedly bought, for clients' accounts, shares in advance of issuing the false notices.

He is charged with breaches of anti-fraud provisions of federal securities laws and the SEC seeks injunctions, disgorgement of profits and fines. The SEC's powers are civil not criminal and therefore it cannot seek criminal penalties.