Revere Securities LLC
Revere acted as a lead underwriter or selling group member for foreign-based, small-cap IPOs that bore hallmarks of potential “ramp-and-dump” schemes, failed to detect and report potentially suspicious transactions related to those issuers, and did not have a reasonable customer identification or due diligence program.
Since 2022, Revere’s core business has included serving as a lead underwriter or selling group member in IPOs for predominantly foreign-based small-cap issuers, more than 40 of which involved issuers that operated in Hong Kong or China. In some of Revere’s small-cap IPOs, the issuers’ stock prices experienced significant, unusual price increases immediately after the IPO before rapidly collapsing, resulting in millions of dollars in secondary market losses. Trading in Revere accounts bore multiple indications of potential manipulation, including coordinated trading and trading a significant portion of the daily volume.
Revere’s customers for these offerings included customers from foreign jurisdictions, such as Hong Kong or China. Despite this, the firm did not have adequate procedures to verify its customers’ true identities. Multiple sets of seemingly unrelated customers opened new accounts on the same dates, reported living at the same residential addresses, and then proceeded to engage in identical, or substantially similar, trading patterns in the same issuers.
In one instance, Revere allocated more than $1.5 million worth of IPO shares, almost all its allotment, to just eight customers who all were referred to Revere by a foreign broker-dealer. Four of those account holders claimed to be unemployed yet reported income exceeding $200,000 annually, and seven of the eight applications contained contradictory information about the source of deposited funds. Revere opened all eight accounts anyway, without adequately verifying the accuracy of the customers’ information.
On IPO day, the stock surged 318% before collapsing more than 50% by the close of the market. All eight customers sent emails on the same day directing Revere to liquidate their shares from IP addresses that could be traced back to countries other than where the customers purportedly lived. Revere did not identify any of these factors as potentially suspicious.
