January 13, 2014: On Friday, 10 January, a long-dormant penny stock called Grand Pacaraima Gold Corp. rocked Pennyland, rising an astonishing 2442.86 percent to close at $0.089 on volume of 8.4 million shares. Dead junior miners that never mined anything but investors' pockets don't often generate much excitement, but this was an exceptional case. In December, the company had submitted a corporate action request to FINRA for a ticker change, and that change became effective on 27 December. GPGD, as it once was, emerged as BITC.
The new ticker went largely unnoticed until BITC changed the link to its website on OTCMarkets' Company Info page. The old site, which had so little traffic it hadn't been crawled by Web Archive in years, became a new single page rudimentary placeholder for a bitcoin exchange.
The buzz generated by BITC's performance on Friday continued throughout the weekend. The cherry on top, at least for penny players, was a "story" that appeared on Sunday at CNN's iReport site. It certainly caught our attention here at Pumps and Dumps.
In it, a person calling himself "Professor Al," and claiming to be an "MBA with more than 12 years of experience as Equity Research Analyst and analyzing of phenomenal stock moves"gushed that he'd not seen such a "solid move" since the Volkswagen short cover in 2009. The Professor went on to say that BITC's exchange would open for business on 1 February, and that "BITC executives have amassed a sizable fortune of Bitcoins, an estimated 550,000 BTC to be exact." Really? The company itself has released no such information.
Outrageously, our friend Al confides that "it has not been reported who they have teamed up with to create this exchange," and then goes on to tell his readers that those august personages are none other than Cameron and Tyler Winklevoss, the twins made famous by the movie, "The Social Network", which was about the creation of Facebook. Noting that the twins are planning to list a bitcoin ETF, he lamely explains that they "wanted to create more liquidity and lessen the volatility." Come again?
The Winklevoss brothers are enthusiastic about the future of bitcoin, and have indeed filed an initial registration statement with the SEC on Form S-1. It has not yet been deemed effective. Nowhere in it is Grand Pacaraima, or anyone connected to it, mentioned. Even the twins don't own 550,000 bitcoins. Nor does the FBI, which is estimated to be the biggest U.S. holder, at 144,000 bitcoina.
It should be noted that although iReport is owned and operated by CNN, its contributors are not CNN reporters. Members of the general public can create accounts and send in any story they believe may be of interest, much like Seeking Alpha is available for public contributions Those considered to have particular merit may be vetted by the network; that will be noted on the page on which the story appears. This BITC story was not vetted.
"Professor Al" has attached a photo to his iReport profile. The same photo appears in several stories about Vishay Shah, managing director of Deutsche Bank's US-based alternative energy and semi cap equipment divisions. Shah, unlike the soi-disant professor, knows how to write, and how to spell. Clearly, our anonymous iReporter filched the picture in a misguided attempt to lend credibility to himself and his BITC pump job.
Interestingly, late Sunday night someone calling himself "BITC" added a comment to the iReport piece. Among other things, the human BITC said: "It is very sad that this kind of unverified information makes its way to such a respected site as CNN.com. The author calling himself Professor Al, of this article has NEVER contacted BITC, nor interviewed anyone in BITC, and he was NOT hired to write on the company's behalf…."
Just in case that iReport disappears in the near future, a copy has been preserved here.
Bitcoin is what's known as a "crypto-currency." It was introduced in 2009 by a developer calling himself Satoshi Nakamoto, and uses cryptography to control the creation and transfer of money. Pumps and Dumps does not specialize in cryptography, and will therefore not attempt to explain the genesis or operation of the system. Suffice it to say that participants clever with code can "mint" bitcoin by "mining" them. Bitcoin themselves may be acquired by mining, or in exchange for products or services.
Worldwide, the authorities are wary, fearing illicit use of the system. China has recently taken strong measures limiting use, and last year the FBI shut down the Silk Road online black market, which was the source of the 144,000 bitcoins the agency now controls. Nonetheless, some merchants in the U.S. and elsewhere are embracing the new technology. Overstock.com now offers a bitcoin payment option, and Zynga is testing a similar system. It was recently reported that some marijuana collectives, frustrated by the banking industry's refusal to allow them to open accounts, may turn to bitcoin. Given the recent mainstream media-fueled run of penny pot stocks, it isn't surprising that a penny bitcoin operation would pop up to satisfy traders' need for a new big runner.
There are, of course, plenty of bitcoin exchanges, all of them run by people more knowledgeable and sophisticated than those associated with BITC. One example is Cryptsy; another is Mt. Gox. Even respectable Kitco offers exchange rates.
It seems bitcoin is also popular with dentists. As it happens, Grand Pacaraima is controlled by Greg Rubin, a cosmetic DDS who said in a press release he issued last week: "I want to be known as the dentist who accepts Bitcoin and I'm working on a website that's called www.DentistBitcoin.com… that will provide the latest news and developments in the Bitcoin industry as well as the dentistry field."
What is now Grand Pacaraima began life as a Nevada company called United Development International, incorporated on 7 November 1989. United was purportedly in the gold and diamond mining business, and was controlled by Robert Doherty. A public company, it traded on the Pink Sheets under the symbol UDVE. On 30 June 2005, it announced that it had sold UDVE's assets to a "Philippine consortium" called Mindenao Gold Mining Corp., which would trade as MDGM. The new company's Philippine operations were managed by Nestor C. Buenaflor.
Buenaflor's name is familiar to long-time penny addicts. In early 2006, he was named as vice president for business development and marketing for Paychest, Inc. Curiously, the OTCMarkets filing in which that announcement was made no longer works. Just as well for Buenaflor: Paychest was the successor company to Mellon Financial, a deplorable scam run by the notorious Mario Pino. At the time of Buenaflor's apparently brief involvement with PYCT, Pino was still the company's only beneficial owner.
At that time, Pino was also associated with Elvira Gamboa, better known as Pearlasia, once president of the Dominion of Melchizedek, a pretend country that does real business in bank and penny stock fraud. Like Buenaflor, Gamboa is from the Philippines. Pearl is a larger-than-life character who moved to the U.S. in the early 1980s. She soon married an American. The union apparently lasted no more than 10 years. Our heroine then met Mark Pedley, son of the founder of the Dominion. Pedley, also known by "Branch Vinedresser" and a number of other aliases, had done prison time in the '80s. Upon his release, he became more serious about the Dominion and its peculiar, often zany, brand of mystic religion.
as Branch Vinedresser
Pearl was introduced to the fine art of penny stock fraud by none other than Sandy Winick. Winick is a Canadian who's lived in Toronto or Vancouver most of his life. In the late 90s, middle-aged and unsuccessful, he hit upon the stock market as a better way to make money than he'd yet found. He bought a shell company called HeathCore Medical Solutions, and renamed it Adatom.com. Adatom eventually became Blackout Media Corp. (BKMP). Along the way, Winick spun 59 new entities off BKMP. He gave one of them to Pearlasia; it later became her flagship scam, Pearl Asian Mining Industries Inc. (PAIM), which morphed into ZNext Mining Corp (ZNXT). She also served briefly as CEO of a few of the other spinoffs, and received free stock in a number of them.
Back to BITC
Winick typically moved his companies around, changing their corporate domicile every few years. Pearl did the same. Both of them also liked to use transfer agents controlled by them. That made the issuance of vast amounts of unregistered securities so very much easier.
Winick's first transfer agency was First Public Securities Transfer Corp. It was formed by him in Oregon in July 2002. He and Pearl installed David Korem as manager. Though OTCMarkets only shows a few companies listing First Public as their TA, once that list was much longer. Korem handled transfers for all of Pearl's companies, and most of Winick's, until Winick founded a new agency, American Heritage, in Ontario, and put Kolt Curry in charge. Curry is one of those recently arrested and jailed by the DOJ.
First Public was Grand Pacaraima's transfer agent until as late as 2010. It is not easy to get an idea of what went on with Gran Pacaraima over the years. When it took over the United Development shell, its corporate domicile was changed to Oregon on 31 May. On 24 June of the same year, it merged with Mindenao Gold Mining, with Mindenao emerging as the surviving entity. On 14 May 2007, it was incorporated as Grand Pacaraima Gold Ltd in London; it was dissolved there early the following year.
But according to the Initial Company Information and Disclosure Statement submitted to OTCMarkets on 22 February 2010, Grand Pacaraima was formed in British Columbia on 6 February 2006. None of this makes much sense. It is difficult to see how the transition from Mindenao to Grand Pacariama was accomplished, but the people behind the company are not keen on providing detail. BITC has only made seven submissions to OTCMarkets, all from 2010 and one of them hidden, and has never reported to the SEC.
Message board posts from 2006 about what is now BITC are the only source of available information for that time period, and they suggest that in that year shareholders didn't even know who the company's CEO was. Several tried to ask, but were rebuffed. By early 2007, however, Greg Rubin the cosmetic dentist had come on board. The corporate records for Grand Pacaraima in the U.K. show him as a director, along with Abdoumalik Abdoulladjanov. Simon Rubinov, who seems to be Israeli, was secretary. He evidently goes by Rubin sometimes, and Greg Rubin is a member of his Google+ circle. It seems possible that the two are related.
By November 2007, Greg Rubin's phone number was listed as the contact for Grand Pacaraima in press releases. How did he come to be involved? Rubin has been a director of two companies having "Central Asia" as part of their names: Central Asia Franchise Holdings and Central Asia Construction and Development. The second of these--alternatively written Central Asia Development & Construction Co.--perhaps even Rubin can no longer keep track of his exceedingly numerous and complicated penny stock dealings--changed its name to Amerossi Energy Corp in 2004, and then to Nadir Energy & Mining Corp. in 2008. The dentist played a role in all three. Amerossi was--you guessed it--a Sandy Winick company. The chairman of Amerossi in 2008 was Rubin's buddy Abdoumalik Abdoulladjanov, who had once been premier of Tajikistan.
That never happened, and Amerossi became Nadir (NENY) instead. It was well named: it and all the other companies discussed here, with the exception of BITC, have either had their registration revoked or are trading at $0.0001. None ever really did anything but issue press releases promising exciting new ventures that failed to get off the ground. They did do frequent reverse splits, however, and the histories of some--especially PAIM / ZNXT--are marked by inexplicable stock issuances.
BITC and Modern Energy
On 6 November 2007, Grand Pacaraima announced the purchase of oil and gas interests from Modern Energy Corporation (MDRG). MDRG shareholders would receive a special dividend of 100 shares of GPGD for every common share of MDRG they owned. That sounded exciting, but proved in the end to be a giant headache. The transaction entailed a large reverse split of Modern's stock, to be followed by a forward split The execution of these corporate actions was flawed to the point of illegality.
Scottrade, ETrade, and others found themselves facing forced buy-ins, and sued. They were granted an injunction in federal court, but Scottrade was not entirely satisfied, and pursued the case for several years. Scottrade's amended complaint explains the situation in detail. The transfer agent who presided over this mess was David Korem/Korman of First Public; he and the firm were Modern Energy's co-defendants in the case. The court found that Pedley and a co-conspirator, Mike Iaone, were culpable for failing to return certain stock certificates to DTC. DTC applied a global lock to Modern's securities. Around the same time, Iaone was indicted on charges of income tax evasion and fraud.
In an earlier incarnation, MDRG had been Riverbank Investment Corp (RRBK). One of RRBK's beneficial owners was Paychest Inc., Mellon Research's successor company. Mellon, of course, was created by Mario Pino.
Where was FINRA?
Things did not improve for Grand Pacaraima. In 2010, it issued a couple of press releases about an improbable plan to buy a resort proper in Timor Leste (formerly East Timor). That deal involved a person called Yupi Haryanto, an Indonesian said by some to be head of a money laundering ring. Whatever Haryanto may or may not be, the project fell through, as all projects involving this company had.
Around that time, Rubin—in a departure for him—helped broker a transaction for Vortex Resources Group, a fully reporting company. As a result, Vortex became Yasheng Eco-Trade Corp. Rubin was appointed to the board of directors. He resigned from the board in April 2010, “to pursue other opportunities.” Yasheng Eco-Trade changed its name to just plain Eco-Trade (BOPT) in December of that year, a dirty William Lieberman scheme that we profiled just as a Pump & Dump campaign was beginning on that ticker. Maybe it was coincidence, maybe it was fate, but in April 2012 it was halted for more than 10 days by FINRA. The organization cited potential problems with clearance and settlement, which presumably had been caused by a promotions in which Stock Market Authority, and presumably Francisco Abellan, had participated. It now trades infrequently on the Grey Market.
In 2012, a Texas energy company called Embassy Oil Development Corporation planned a reverse merger with Grand Pacaraima, but as usual, the transaction was not consummated.
It is difficult to see any reason why this new bitcoin project should succeed. The history of the BITC shell--and a shell is what it's always been--is about bad actors and bad acts. A more perversely distinguished penny stock rogues' gallery would be hard to assemble.
As early as 2006, the British Columbia Securities Commission imposed a cease trade order on the stock in connection with the Mindenao Gold merger. That CTO is still in effect today. On Friday, OTCMarkets demoted BITC to caveat emptor status.
Grand Pacaraima's ugly past easy to uncover. So why, when a corporate action request was filed with FINRA for a ticker change from GPGD to BITC, did that request sail through? It should have been obvious to whoever handled the matter that the company had been completely inactive for some time. A little effort would have turned up the involvement of Winick and, even more importantly, David Korem/Korman and First Public Securities Transfer. A dishonest--in Korem's case, criminal--TA presents a clear danger to shareholders and to all market participants. Korem worked for GPGD for years, only leaving his position when the Scottrade case and his subsequent arrest put First Public out of business.
Although Rule 6490 authorizes FINRA to demand additional documentation from companies making corporate action requests, it seems that in this case that did not happen.
At this moment, we don't even know for sure who the transfer agent is. This matter only came to our attention late Friday; there's been no time to try to locate the TA. The public deserves more information than it has about Grand Pacaraima. At the open, the stock will do what it will do. A tremendous unofficial pump is underway, thanks to the highly suspicious iReport, and nobody seems to be minding the store.
Before the bell on 13 January, the company announced, to no one's surprise, that it plans to chance its name to First Bitcoin Capital Corp, "as it prepares to enter booming BITCOIN markets." It added that it plans to file an annual report with OTCMarkets that will be "similar" to the 2010 financials, which is not encouraging.
The spokesperson quoted was "S. Rubin," identified as chairman of the board. Presumably the "S" stands for Simon. In a final comment, Rubin dissociated BITC from Sunday night's iReport:
"The company denounces the rumors spreading about its executives owning over 500,000 bit coins and wishes to make it clear that there is no connection between BITC and the Winklevoss twins."