A Pump and Dump from Down Under: Genetic Technologies Ltd. (GENE)

Over the course of the past 2-3 weeks, Genetic Technologies (NASDAQ: GENE, ASX: GTG) has gone from $1.00 to an intraday high of $11.00, a 1,000% gain. GENE’s meteoric rise began on 01/29/15, when it rocketed from $1.28 to an intraday high of $4.68, before closing at $3.61. During the subsequent week, GENE consolidated around $3.70, and its second major run-up began on 02/11/15. Its initial spike at the end of January was caused by a statement released by the company, which stated that six breast cancer treatment centers would start offering it’s breast cancer screening drug, BREVAGenplus, at some point in 2015. This initial spike in GENE stock constitutes a hollow breakout, as their news (unlike news such as positive earnings, a buyout, or sale of assets) did not add any monetary value to the company. GENE hasn’t released any news since the end of January, making this second run-up of the stock price very puzzling.

Because there has been no news to drive up the price of the stock, I decided to perform my own independent research on GENE and publish my surprising findings below.

Research on GENE

Genetic Technologies Ltd. is based in Australia, and is traded on the Australian Securities Exchange under the ticker symbol GTG. Genetic Technologies is also listed on the NASDAQ Capital Market under the symbol GENE, and the company has 578.5 million shares outstanding (in both Australia and in American Depository Receipts). 574.5 million of those shares are in Australia (making Genetic Technologies a penny stock on the ASX, with a price of $.0641 in USD), with only 4 million shares in the U.S.  The extremely low U.S. float makes the stock easily manipulated.

GENE has a History of Fraud and Stock Manipulation “in its genes”

Genetic Technologies actually has a long history of fraud and manipulation.  The founder of GENE, and its former CEO, Mervyn Jacobson, his daughter and her husband (Jacobson’s son-in-law) were all convicted of securities violations and fraud, and served time in prison, for trying to “prop the stock up” between 2005-2007.  The fraud worked like this.  As the stock was plummeting, Jacobson gave $1.55 mm to his daughter and her husband to buy ASX:GTG in an effort to artificially inflate the stock price.  They used the funds to buy the stock and pump up the price, and helped to save Jacobson the $11.4 Million that he would have owed on margin had the stock continued downward.  For their illegal actions, Jacobson’s daughter and son-in-law went to jail in 2007 for stock manipulation and fraud.  Amazingly, Jacobson avoided prosecution by claiming that his two underlings acted without his knowledge, and the $1.55 mm he gave to his daughter was solely a gift (what a good father!!).

Due to the controversy surrounding GENE after his daughter and son-in-law were convicted, Jacobson stepped down as CEO in 2007, but he remained on the board as a non-executive director and continued to act as a consultant to the company with regard to its licensing program.  (I guess he had a lot of good pals on the board who really believed he did nothing wrong.)

But prosecutors never gave up the investigation and didn’t buy Jacobson’s gift story.  Through further investigation, prosecutors were able to debunk Jacobson’s fiction, and charged him with stock fraud.  In November of 2014, Jacobson was found guilty on 35 counts of market manipulation and stock fraud, and was sentenced to 1 year imprisonment.

Do GENE investors today know any of the sordid history of this company?

Do they know that GENE has stock manipulation and fraud “in its genes”?

Given its history, it is not hard to assume that GENE continues to suffer from insider manipulation and pump and dump schemes. And with the CEO committing this kind of fraud, and his obviously cozy relationship with the other members of the board, it is almost certain that the existing board must know about things like stock fraud and manipulation.

Overall, the pump and dump occurring in GENE right now is similar to past pumps in stocks such as BVSN, OXBT, and LIVE, and if history is any indication GENE will collapse very soon.

(Read the article on Mervyn Jacobson and Genetic Technologies below).

A doctor who claimed to have a $100 million fortune has been found guilty of manipulating the stock market for financial gain. Mervyn Jacobson, 72, of Brighton, had denied claims he was a “fraudster” and pleaded not guilty to 35 charges of conspiracy to manipulate the market and fund transactions to create an artificial share price between May and November 2006. But a Supreme Court jury found him guilty of all charges on Wednesday, after an eight-week trial. Jacobson put his hands over his eyes and to his brow when the first guilty verdict was announced, and he later covered his face with his hands as he sat in the dock. Crown prosecutor Jeremy Rapke, QC, described the case during the trial as one of price-fixing. Advertisement Jacobson had been involved in research and other activities involving human genetic material before Genetic Technologies invented a method to obtain valuable information located within what is called the non-coding DNA of all species. Shares in Genetic Technologies were listed on the Australian Stock Exchange (ASX) and Jacobson controlled more than 40 per cent of the company’s shares, totalling more than 150 million shares. The Crown case alleged Jacobson’s daughter, Tamara, and her second husband, Geoffrey Newing, from Toorak, acted illegally and were heavily involved with Jacobson in manipulating the price of Genetic Technologies shares on the ASX. Mr Rapke said much of Jacobson’s wealth was tied up in the company and his financial stability was dependent on the company’s success and its share price. So when the share price began to fall and the doctor started receiving margin calls on a $11.4 million loan with Opes Prime, Mr Rapke said Jacobson gave more than $1.55 million to his daughter. The prosecutor said Tamara, her husband and two stock brokers then used the money to buy Genetic Technologies shares on the ASX to maintain the price at an artificially high level. Jacobson admitted giving Tamara large sums of money but claimed the cash was a gift. He told the jury Tamara had been a day trader buying and selling shares in his company when he became aware she was being investigated by authorities. “It was all crazy, with hindsight,” the doctor said. When it was put to Jacobson that he had known his daughter had been manipulating his company’s share price during 2006 because it was at his request, he replied: “That is false … what you are saying is very offensive and false.” “She’d been doing a lot of things that make no sense to me, but I was not involved and I was not consulted and I was not aware of it.” Mr Rapke told the jury if the evidence pointed to Jacobson being a fraudster, then “no amount of charitable work, no amount of involvement in the arts, can erase or alter the effect of that evidence”. But defence barrister Joshua Wilson, QC, claimed his client was a person of good character who had no need to set up a scheme to prop up the share price of his company. He said the conspiracy theory involving Jacobson could have come straight from a Hollywood movie. “His personal wealth was in the vicinity of $100 million … is there a burning need for a man of such substance to engage in the criminality that our friends (the Crown) contend, given that he had assets all over the world?” Mr Wilson said. Justice Stephen Kaye extended Jacobson’s bail so psychological and medical tests could be arranged within the next fortnight, before a pre-sentence hearing on November 19. He is required to report to police twice a week while on bail and has had his passport seized. Justice Kaye thanked the jurors for the close scrutiny they had applied to the evidence over such a long and complex trial.

Link to article: http://www.smh.com.au/business/brighton-doctor-mervyn-jacobson-found-guilty-of-manipulating-the-stock-market-20141105-11hh0d.html

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6 Responses to A Pump and Dump from Down Under: Genetic Technologies Ltd. (GENE)

  1. Sri says:

    Wow. Just wow. He set up his daughter and her husband to save his own ass, and then he lied about them in court calling her a daytrader?! Wow.

    Like

  2. Johnny 'Muscles' Cheng says:

    disgraceful !

    Like

  3. jason says:

    so the CEO and his kids went to JAIL for fraud YAY !! thats Great !!
    they are Gone and it teaches the Board a BIG lesson ..

    Do Not Manipulate the SP ..or you will be Caught and put in JAIL !!!

    hello ? who in the Board ..would Dare Falsely pump the Sp up now ??

    NO ONE 🙂

    Like

  4. Jeannie says:

    I don’t think this is the only bad apple in this orchard. If you look at the ups and downs of this stock over that last two years, there continues to be a credibility, if not a fraud, issue. How many press releases, meant to boost stock prices, are just duplicates of two and three year old releases? How many new breast centers have really come on board? How many patients are really taking this test? How many tests have actually been sold. Where ARE the profits? Where are the millions and millions of dollars, that this company has spent, going? Where are the founding employees? How many have jumped ship? Where are the financials? Can’t find anything from 2015. How do they get investigated?

    Like

  5. Everyone lost a bundle on this damn stock. Take a look at this website by his own son. It’s an amazing story. If he’s prepared to sell out his own daughter and then use her as the patsy for his own defence, and rip off his own son like his son claims, we as shareholders probably don’t have a lot of hope…
    Wondering if any of them will have the balls to launch Defamation action against the son. If everything the son says is true, and it seems to be, then it’s not Defamation. The truth can hurt but that’s not illegal.
    Fascinating stuff.

    Like

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