The Securities and Exchange Commission has filed a lawsuit in connection with the strange buyout offer made to Avon last month.
According to a court filing, the SEC has sued a bunch of firms: PTG Capital Partners, PST Capital Group, Nedko Nedev, Strategic Capital Partners Muster, and Strategic Wealth Investment.
There's also a defendant identified as Nedev, aged 37 – a trader who lives in Bulgaria.
The SEC alleges that the defendants made "coordinated attempts to fraudulently manipulate the price" of Avon, as well as Tower Group International and Rocky Mountain Chocolate Factory."
Avon's stock rocketed nearly 20% on May 14 after a filing on the SEC's Edgar website indicated PTG Capital Partners was offering to buy Avon for $18.75 per share.
The filing had typos; in the 'about' section, the firm referred to itself as "TPG Partners," a massive private equity firm that is not apparently affiliated with PTG Capital Partners.
The SEC alleges that PTG used a fake notarized signature to apply for its login ID for Edgar. Here's how the SEC describes PTG Capital in the filing:
"PTG Capital identifies itself as a company incorporated in the British Virgin Islands and located in London, United Kingdom. However, there is no indication that PTG Capital is a legitimate company organized for any other reason than the stock manipulation scheme described here and PTG Capital (to the extent it actually exists) is operated from Sofia, Bulgaria."
The SEC further alleges that Nedev, the trader, held an Avon Contract for Difference, or CFD. This is a derivative that allows traders to transact and possibly profit on price movements without actually owning the underlying security.
Avon's stock plunged 22% between January 6 and the day of the spurious filing, wiping out about $83,000 from Nedev's CFD holding, and $5,000 from the stock position.
And as Avon's stock surged, Nedev sold off a portion of the CFD position and earned about $4,879 more than he would if the stock was trading normally.
The day after the filing dropped, Reuters reported that the FBI was looking into the suspicious bid.
In trading on Thursday, shares of Avon were lower but little changed.
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