SEC v. Howard M. Appel (float locking, 2019)
Judgment entered
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In May 2019 the SEC reported a consent judgment against Howard M. Appel for orchestrating schemes to manipulate three microcap stocks by secretly controlling their float and using matched trading to simulate demand, from which he took over $3 million in profit. The judgment awards $3,868,699 in disgorgement and $487,248 in interest, deemed satisfied by his criminal forfeiture, and imposes penny stock and officer-director bars. He was sentenced to 60 months in prison.
The record
| Agency | SEC |
|---|---|
| Release number | LR-24475 |
| Date filed | 2019-05-22 |
| Date resolved | 2019-05-22 |
| Court | U.S. District Court, Eastern District of Pennsylvania |
| Status | judgment |
| Asset class | equities |
| Criminal parallel | Yes: sentenced (Appel) |
| Sentence | 5 years |
| Bars imposed | penny stock bar, officer-and-director bar |
| Defendants | Howard M. Appel |
| Cited as charged or alleged | Exchange Act s.10(b) and Rule 10b-5 ; Exchange Act s.9(a)(1) ; Exchange Act s.9(a)(2) ; Securities Act s.17(a) |
| Techniques | Float locking |
What was ordered
- Civil penalty
- —
- Disgorgement
- $3.9m
- Prejudgment interest
- $487k
- Total relief
- $4.4m
- Alleged gain
- $3m
What is alleged to have happened
The Securities and Exchange Commission announced this judgment on May 22, 2019 as litigation release LR-24475, in SEC v. Appel, civil action 18-cv-3200 in the Eastern District of Pennsylvania. Judge Diamond entered a final consent judgment on May 10, 2019 on a complaint filed July 27, 2018. The defendant is Howard M. Appel (1 individual, 0 entities).
The complaint alleged that Appel and associates he recruited secretly acquired enough of three microcap companies' stock to control the float, then created a false appearance of demand through matched trading, and that he sold his shares into the market for over $3 million in profit. He had a prior conviction for conspiracy to commit securities fraud and was on probation during some of the conduct.
The judgment enjoins him under Securities Act Section 17(a)(1) and (3), Exchange Act Sections 9(a)(1), 9(a)(2) and 10(b) and Rules 10b-5(a) and (c), imposes permanent penny stock and officer-and-director bars, and orders $3,868,699 in disgorgement and $487,248 in interest. That money is deemed satisfied by the forfeiture order in the parallel criminal case, in which Appel pleaded guilty and was sentenced to 60 months in prison, forfeiture of $3,868,699 and a $200,000 fine. The criminal fine is not recorded as a civil penalty.
For the regulator's own account of the facts, read the primary document linked above.
What technique is this, and how does it work?
This action is tagged with one technique in our taxonomy. The tagging is ours: regulators charge statutory provisions, not technique names, so the mapping is an editorial judgement described in our editorial policy.
- Float locking — see how it works, what statute it engages, and every other action tagged the same way.
Timeline
- 2019-05-22 Litigation release published
Primary documents
Everything on this page derives from the documents below. Where our summary and the primary document disagree, the primary document is right.