Until yesterday, SmokeFree Innotec In (PINK:SFIO) had been enjoying a quite stable market performance in pennystockland. Not anymore. The main reason is obviously the SEC and, in particular, its litigation release No. 22018 dated Jun. 30, 2011.
As a result, SFIO has been losing ground faster than the speed of light for the last 24 hours. Following the publication of the complaint, SFIO stock took a giant nosedive, losing a staggering 80% in value and clocking in at its early-May level of $0.0064 per share. Moreover, the massive sell-off triggered such a giant volume spike that almost 84 million shares of SFIO stock changed hands by the time the session came to an end. The latter turned out to be a ten-week high, as well as eight times higher than the daily average trading volume.
Now, back to the point. According to the official SEC release, CEO Thomas Schroepfer, a/k/a Thomas Schroepfer Baetsen, in collaboration with promoter Charles Fuentes, has been charged with participation in ‘a fraudulent scheme involving the stock of SmokeFree involving illicit kickbacks and phony agreements.’ The litigation goes on to emphasize that Schroepfer, assisted by Fuentes, gave bribes to a purported trustee of a pension fund with the purpose of inciting the latter to buy restricted SFIO stock to the amount of 400 thousand. The scheme also included a reward for the intermediary in the form of common stock.
As you might expect, this is the one and only example of such malpractice. However, it was SFIO that fell victim because the pension fund trustee had been created by the FBI, just as the middleman turned out to be a witness cooperating with the Agency. The news has already spread like wildfire and if this were not enough, the company has just been designated as a caveat emptor on OTCmarkets.com.
In a nutshell, SEC calls on the court to impose adequate sanctions to defendants including a permanent injunction, a disgorgement and civil money penalties order, as well as an order preventing both Schroepfer and Fuentes from conducting any penny stock offering whatsoever.
Being one of the few pink sheets that actually has a final product on the market, SFIO seems to have entered into the worst-case scenario possible. At this point, the hugely negative impact is imminent. So, the big question is: will the new to-be-announced management succeed in getting the company back on track?
