The Securities and Exchange Commission charged a social media promoter for recommending penny stocks to millions of his Twitter followers and allegedly boosting the price in order to sell his own shares for a profit.
According to the SEC’s complaint filed in federal court in California’s Central District, Michael M. Beck made about $870,000 in his successful attempts at "scalping," which is when a promoter recommends a stock they currently hold and are planning to sell (or are already in the process of selling).
Beck, who is based in San Pedro, Calif., used the Twitter handle “@BigMoneyMike6” between 2017 and 2019, and had as many as 3 million followers, according to the SEC. He would use his handle to get followers to sign up for his newsletter, “TeamBillionaire.” In emails, Beck described the newsletter as a “NETWORK of the TRADER for the TRADER;” the newsletter eventually had more than 740,000 followers.
But during this time, Beck was purchasing shares from microcap issuers directly or through the accounts of his mother, Helen Robinson, who is also named as a relief defendant in the complaint. Beck, who now held the microcap shares, would then tweet to followers that a stock pick alert would soon arrive. A few days before any public unveiling, Beck would email his newsletter followers, identifying the stock recommendation he would post on Twitter and giving those followers a chance to buy before he revealed anything on social media, according to the commission.
“This preview of the stock recommendation generally increased the stock’s trading volume and price, making the stock look more attractive to potential investors when Beck issued his public recommendation,” the complaint read.
According to the SEC, Beck would sometimes pay third parties to post their own positive messages about the stocks he held, which would also boost the trading volume and price. In doing so, the stocks he would recommend would look more enticing to potential investors when he made his public announcement.
Beck would then tweet his stock pick alert, and would continue to tweet the recommendations and email followers to his newsletter. But the SEC claimed that when the stock price rose (either after Beck had emailed his “TeamBillionaire” recipients or after he made a stock pick alert on Twitter), he would sell the stock he held, or the stock being held in his mother’s accounts.
“None of Beck’s recommendations disclosed that Beck was either planning to sell or actually selling the stock while he was recommending that others buy it,” the SEC complaint read.
Beck and attorneys representing him could not be reached for comment as of press time.
The SEC seeks a permanent injunction and a penny stock bar against Beck, disgorgement with prejudgment interest against both Beck and his mother, as well as a civil penalty.