Wednesday, October 2, 2013

FINRA Files Cease and Desist RE: John Carris Investments and Fibrocell Science

By Tim Dulaney, PhD, FRM

Yesterday, the Financial Industry Regulatory Authority (FINRA) announced a temporary cease and desist order against "John Carris Investments, LLC (JCI) and its CEO, George Carris, to immediately halt solicitations of its customers to purchase Fibrocell Science, Inc. stock without making proper disclosures."

According to FINRA's complaint (PDF), JCI manipulated the stock price of Fibrocell (FCSC) through unauthorized purchases and so-called 'matched trades'.    In particular, between May and September 2010, the defendants allegedly conducted "pre-arranged trading [...] to create the false appearance of trading volume and to maintain the share price at an artificial level".1



According to the SEC, the defendants' activity frequently accounted for the majority of the trading volume during this period.  In addition, some of the unauthorized purchases also involved customer accounts that "held insufficient funds to satisfy the purchase."

Independent of the alleged manipulation of Fibrocell's stock price, FINRA also alleges that "Carris and JCI fraudulently sold stock and notes in its parent company, Invictus Capital, Inc., by not disclosing its poor financial condition."  In particular, by paying "dividends" to current investors funded through the sale of new Invictus Capital securities.  Invictus has now defaulted on millions of dollars in notes and is attempting to obtain new investments for repayment of older debt.

For more information, see the cease and desist order (PDF) and the complaint (PDF).
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1 Source: Yahoo! Finance.

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