The Securities and Exchange Commission (SEC) has got to the bottom of the apparent hoax bid that saw Avon’s share price soar 20% last month – partially, at least.
Last week, after using parallel trading analysis, the SEC issued a statement saying it had managed to track down and freeze two US brokerage accounts that were connected to schemes being used to manipulate Avon and two other companies.
At least one of the two brokerage accounts in question were controlled by Nedko Nedev, 37, who the SEC traced via an IP addresses to Sofia, Bulgaria. Nedev’s account, which held a substantial position in Avon contracts-for-difference, was losing value; Nedev had purchased Avon’s stock and options on its stock that had unrealised losses of $87,000 as of 14 May, when the hoax bid went live.
The two accounts, which contain approximately $2m in assets, were frozen by the SEC in order to thwart any ability to cash in on the illegal proceeds; after the false bid went live, Nedev sold 12,000 options linked to Avon’s stock at an average price of $7.01.
At the time, the SEC also connected the false Avon bid to two other events that followed similar patterns and could be traced back to Bulgaria: a filing concerning Rocky Mountain Chocolate Factory in 2012 and a press release related to Tower Group International in 2014. Nedev held shares in both companies, which were not performing well.
However, in the case of Tower Group International, doubt has been cast over the SEC’s initial conclusion. In this case, instead of a filing, the SEC said an alleged false press release was issued attributed to a company called Euroins Insurance, concerning an acquisition. This caused a surge in the share price of Tower Group stock. But in an interesting turn of events, The Wall Street Journal has reported that Kiril Boshov, Chairman of the Borad of Euroins' parent company, Eurohold Bulgaria, said this offer was legitimate and has denied any link with Nedev.
As it stands, the SEC is has sued Nedev as well as Strategic Capital Parners Muster and Stategic Wealth Investments, which each own one of the brokerage accounts; PTG Capital Partners, which submitted the Avon filing; and PST Capital Group.