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22 Ways To Manipulate Penny Stocks As Told By Paul Gozzo

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Written by Timothy Sykes
Updated 1/20/2023 9 min read

I don’t know how scam artists sleep at night, but I love that they exist because their actions allow for predictable chart patterns, which made me a millionaire, as outlined in my PennyStocking DVD package (it’s legal to profit from penny stock chart patterns)

Not because I think it’s ethical or commendable but because I see corruption all around me and it’s predictable…and that predictability can lead to profits…if you learn what to look for.

Check out Paul Gozzo & PMG Capital who just got banned by the SEC, “without admitting or denying” (BS legal disclaimer…especially since he did plead guilty to one count of conspiracy to commit securities fraud and one count of securities fraud in the United States District Court for the Southern District of Florida!)

This is the meat of SEC PR:

The Commission’s complaint alleges that Gozzo, who was associated with several broker-dealers in a variety of capacities between 1999 and 2008, engaged in a number of manipulative practices, including:

engaging in “bid support” by placing orders for shares at prices below the inside (highest) bid to absorb sell orders and create an artificial floor for the stocks;

trading in multiple accounts through multiple brokers to give the false impression that there was greater demand for the stocks than truly existed; and

coordinating trading among a group of individuals for the purpose of maintaining stock prices.

Without admitting or denying the allegations in the complaint, Gozzo and PMG Capital consented to the entry of Final Judgments prohibiting them from participating in offerings of penny stock and permanently enjoining them from violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5. Gozzo also agreed to pay $437,788 in disgorgement of unlawful profits and prejudgment interest. The settlement is subject to approval by the United States District Court for the Southern District of Florida.

You can read the whole beauty of a court filing HERE, but c’mon Paul, $400k over 9 years of microcap manipulation? You gotta be one of the worst manipulators ever! This is like WallStreetGrand.com pathetic.

The bulk of the SEC complaint really goes into the crime:


A. Agreements to Manipulate the Markets for Microcap Issuers’ Stock

8. Beginning in at least January 2006, Gozzo agreed with another individual who
was involved with and owned large positions ofstock in a number ofmicrocap issuers. Gozzo,
through PMG Capital, agreed with this individual to provide “market capitalization support” to
increase stock liquidity and market awareness for certain issuers’ stock in exchange for cash and
shares ofthe issuers’ stock.

9. Subsequently, Gozzo and others acted in concert to manipulate the markets for the
stocks ofa number ofissuers. In coordination with others, Gozzo engaged in a number of
practices aimed at misleading the market to increase and maintain artificially high prices so that
Gozzo and others could sell offtheir holdings for substantial gains.

B. “Bid Support”

10. Gozzo engaged in “bid support,” by placing orders for issuers’ stock for relatively small amounts of shares at prices immediately below the “inside,” or highest, bid price posted by
market makers.

11. The intended effect ofthese orders was to absorb sell orders to prevent market
sales from causing stock prices to fall significantly. By placing orders at slightly lower prices
than the prevailing bid price, Gozzo created an artificial floor for the price ofa particular stock
and “supported” the prevailing bid.

12. Gozzo placed his orders through different brokerage firms so that market
participants would see a substantial number ofbids posted, all close to the inside bid,·and
conclude that there was greater demand for the stocks than truly existed.

13. In one stock, hereinafter “Issuer A,” Gozzo sent an email asking another trader to
“please put bids in this in this morning on the following names, but not top bids, away bids.” By
asking the other trader not to place a “top bid,” Gozzo was asking the other trader not to place an
order at a greater price than the best current bid. The effect ofthe “away bid” was to have a
market maker show an additional bid, but not to change the current best bid on the issuer’s stock
posted by a market maker.

14. In another stock, hereinafter “Issuer B,” Gozzo told another trader that “we are
going to take that stock and move it up, plus stack some bids lower… just in case… I hope to
move this up well today.” Soon after, Issuer B’s stock price materially increased.

C. Trading in Multiple Accounts

15. Gozzo traded through several different brokerage firms to give the false
impression ofmarket depth to those looking at the market using a “Level II” or “Level III”
trading service, which identify the market makers that are originating bids.

16. Gozzo placed trades in accounts in the name ofhimselfand accounts in the name
ofPMG Capital.

17. For instance, between March and August 2006, Gozzo bought and sold 85,000
shares ofstock in a company, hereinafter “Issuer C,” using five different accounts with three
brokerage firms and producing a net loss.

18. By trading in multiple accounts Gozzo gave the false impression to investors of
more participants and liquidity in the market for the stock ofIssuer C.

19. Gozzo also engaged in coordinated trading in which he and others purchased and
quickly sold stocks, resulting in artificially increased trading volume designed to attract interest
to the stocks and increase the prices.

20. For instance, Gozzo coordinated with a number of individuals in manipulating the
market for a stock, hereinafter “Issuer D.” He told them in an email, “although I am not
quarterbacking this one, I will be there too, you can count on bid support to show depth, as well
as market buying, especially the first two weeks. If you all want to reconnect Thursday to talk
about the first day days … so we can assess what has been going on and what we need to do

21. At times Gozzo arranged “matched” trades in which he and others purchased and
sold stocks in concert. “Matched” orders are orders for the purchase/sale of a ·security that are
entered with the knowledge that orders ofsubstantially the same size, at substantially the same
time and price, have been or will be entered by the same or different persons for the
sale/purchase of such security. This trading was done for the manipulative purposes
of: (1) artificially increasing market activity in the traded stock; (2) misleading the market that
genuine investors were buying for legitimate investment purposes; and (3) artificially propping
up the stock price ofthe traded security.

22. To ensure that the market prices ofthe issuers stock remained artificially inflated,
Gozzo and others coordinated their trading so as not sell too much stock into the market. They
also provided buy-side support for a stock when there were too many other retail investors
selling it. Another trader erriailed Gozzo the group’s strategy in Issuer C, “I suggest that we have
a plan to gradually tick up [Issuer C] each day. I will keep the press releases going… You

supernova placement

23. With regard to another stock, hereinafter “Issuer E,” Gozzo told another trader, “I
think the goal should be to sell 10,000 shares a minimum, every day, however, some days with
higher volume, we can sell 5 times that, so I will be in constant contact.”

24. Through this coordinated trading and other manipulative practices, Gozzo and
others manipulated the prices ofissuer securities to artificially high levels, deriving illegal
trading profits by selling their stock while the stock was artificially inflated.

E. Coordinating with Others who Controlled the Float

25. As the scheme progressed, Gozzo received enough ofone issuer’s stock to take
part in group efforts to control the “float”-the total shares ofa particular stock publicly owned
and available for trading.

26. Another trader orchestrated a reverse merger whereby Issuer E would become a
public company by merging into a public traded shell company. Gozzo and the other trader
agreed to split almost the entire float ofIssuer E’s stock. The other trader explained, “the
structure is 20 million shares outstanding, 5 million in the float and 15 million restricted. We
own all but 32,000 in the float.”

27. Gozzo and others were able to exercise dominion and control over the market of
Issuer E’s shares, permitting Gozzo and others to limit the supply ofIssuer E’s stock and through
coordinated trading to maintain artificially high prices and volume in Issuer E’s stock.

F. The Manipulation Continues

28. Gozzo continued to manipulate the market for several issuers’ stock, even though
other traders had ended their involvement with the issuers after liquidating substantial amounts
of stock. In those instances, Gozzo received stock and/or cash from the companies for investor.
relations services but continued to manipulate the market for those stocks while purportedly
providing legitimate services.

29. For instance, Gozzo arranged a trade between two other individuals in which
900,000 shares of a particular company’s stock, hereinafter “Issuer F,” changed hands below the
market price without the trade being reported to the market. Had the trade been reported, the
size ofthe trade and the discounted price would have caused the market price to fall. In an email
message, Gozzo expressed his happiness about the trade and that it was not reported to the
market: “[I]t did not hit the tape which is even better. I am fired up!!!!”

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Author card Timothy Sykes picture

Timothy Sykes

Tim Sykes is a penny stock trader and teacher who became a self-made millionaire by the age of 22 by trading $12,415 of bar mitzvah money. After becoming disenchanted with the hedge fund world, he established the Tim Sykes Trading Challenge to teach aspiring traders how to follow his trading strategies. He’s been featured in a variety of media outlets including CNN, Larry King, Steve Harvey, Forbes, Men’s Journal, and more. He’s also an active philanthropist and environmental activist, a co-founder of Karmagawa, and has donated millions of dollars to charity. Read More

* Results are not typical and will vary from person to person. Making money trading stocks takes time, dedication, and hard work. There are inherent risks involved with investing in the stock market, including the loss of your investment. Past performance in the market is not indicative of future results. Any investment is at your own risk. See Terms of Service here

The available research on day trading suggests that most active traders lose money. Fees and overtrading are major contributors to these losses.

A 2000 study called “Trading is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors” evaluated 66,465 U.S. households that held stocks from 1991 to 1996. The households that traded most averaged an 11.4% annual return during a period where the overall market gained 17.9%. These lower returns were attributed to overconfidence.

A 2014 paper (revised 2019) titled “Learning Fast or Slow?” analyzed the complete transaction history of the Taiwan Stock Exchange between 1992 and 2006. It looked at the ongoing performance of day traders in this sample, and found that 97% of day traders can expect to lose money from trading, and more than 90% of all day trading volume can be traced to investors who predictably lose money. Additionally, it tied the behavior of gamblers and drivers who get more speeding tickets to overtrading, and cited studies showing that legalized gambling has an inverse effect on trading volume.

A 2019 research study (revised 2020) called “Day Trading for a Living?” observed 19,646 Brazilian futures contract traders who started day trading from 2013 to 2015, and recorded two years of their trading activity. The study authors found that 97% of traders with more than 300 days actively trading lost money, and only 1.1% earned more than the Brazilian minimum wage ($16 USD per day). They hypothesized that the greater returns shown in previous studies did not differentiate between frequent day traders and those who traded rarely, and that more frequent trading activity decreases the chance of profitability.

These studies show the wide variance of the available data on day trading profitability. One thing that seems clear from the research is that most day traders lose money .

Millionaire Media 66 W Flagler St. Ste. 900 Miami, FL 33130 United States (888) 878-3621 This is for information purposes only as Millionaire Media LLC nor Timothy Sykes is registered as a securities broker-dealer or an investment adviser. No information herein is intended as securities brokerage, investment, tax, accounting or legal advice, as an offer or solicitation of an offer to sell or buy, or as an endorsement, recommendation or sponsorship of any company, security or fund. Millionaire Media LLC and Timothy Sykes cannot and does not assess, verify or guarantee the adequacy, accuracy or completeness of any information, the suitability or profitability of any particular investment, or the potential value of any investment or informational source. The reader bears responsibility for his/her own investment research and decisions, should seek the advice of a qualified securities professional before making any investment, and investigate and fully understand any and all risks before investing. Millionaire Media LLC and Timothy Sykes in no way warrants the solvency, financial condition, or investment advisability of any of the securities mentioned in communications or websites. In addition, Millionaire Media LLC and Timothy Sykes accepts no liability whatsoever for any direct or consequential loss arising from any use of this information. This information is not intended to be used as the sole basis of any investment decision, nor should it be construed as advice designed to meet the investment needs of any particular investor. Past performance is not necessarily indicative of future returns.

Citations for Disclaimer

Barber, Brad M. and Odean, Terrance, Trading is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors. Available at SSRN: “Day Trading for a Living?”

Barber, Brad M. and Lee, Yi-Tsung and Liu, Yu-Jane and Odean, Terrance and Zhang, Ke, Learning Fast or Slow? (May 28, 2019). Forthcoming: Review of Asset Pricing Studies, Available at SSRN: “https://ssrn.com/abstract=2535636”

Chague, Fernando and De-Losso, Rodrigo and Giovannetti, Bruno, Day Trading for a Living? (June 11, 2020). Available at SSRN: “https://ssrn.com/abstract=3423101”