SEC sues over alleged stock fraud

The Securities and Exchange Commission sued 11 people and three companies, alleging they took in $64 million from more than 40,000 investors through fraudulent sales of stock in a purported diamond and gold mining company.

The chief executive of CMKM Diamonds Inc., operating from his home in Las Vegas, promoted the company’s stock in false news releases, on Internet message boards and at car-race events without disclosing the company’s “primary activity was to issue and promote its own stock,” the SEC said in a complaint filed in federal court in Las Vegas.

Hundreds of billions of shares of the so-called penny stock were sold, the SEC said. They hadn’t been registered with the agency but were made to look as if they had been, the regulator said.

CEO Urban Casavant made about $31.5 million from the alleged scheme from January 2003 through May 2005, the SEC said. John Edwards, a British citizen accused of leading the fraud, made about $26.4 million, the regulator said. Others made about $6.3 million, it said.

“Although CMKM’s stock sold for well under a penny a share, the defendants were able to reap millions in profits,” Rosalind Tyson, acting regional director of the SEC’s Los Angeles office, said in a statement.

Lawyers for Edwards, 65, and Casavant, 51, didn’t return calls seeking comment.