Microcap Fraudster Caught Selling Stock to Undercover FBI Agent!

SEC v. Andrew Hackett — U.S. Securities and Exchange Commission Litigation Release No. 26222, dated January 16, 2025.

The SEC secured a summary judgment against Andrew Hackett for his role in a microcap fraud scheme involving Arias Intel Corp. (ASNT) stock. Hackett engaged in manipulative trading and acquired shares through questionable means as part of a plan to inflate and dump the stock, ultimately causing over $10 million in illicit proceeds for the group.

In Plain English

Imagine a group of friends decided to hype up a nearly worthless company's stock. They bought a lot of it cheaply, then made it seem like it was worth much more by trading it among themselves and paying someone to promote it. When the price went up, they planned to sell their shares to unsuspecting buyers and split the money. One of them, Andrew Hackett, was caught doing this and faced legal action.

Disclaimer: all facts are drawn from the SEC's own filings; the claims described are allegations unless and until a court rules or the parties settle, and some cases end in dismissal.

How the Alleged Scheme Worked

1. Laying the Groundwork In early 2017, Kevin Gillespie (CEO of Arias Intel Corp. or ASNT), Annetta Budhu (an advisor), and Andrew Hackett (a lender) began planning a 'pump and dump' scheme for ASNT's stock.
2. Acquiring Shares for Budhu In February 2017, Gillespie arranged for ASNT to issue 200,000 shares to Budhu for 'consulting services.' Budhu received these shares in March 2017.
3. Hackett Buys Budhu's Shares In August 2017, Budhu sold her 200,000 ASNT shares to Hackett at a price significantly higher than the stock's trading value at the time.
4. Issuing a Sham Note to Hackett In August 2017, Gillespie caused ASNT to issue a $300,000 convertible promissory note to Hackett. This note allowed Hackett to convert the debt into an additional 750,000 ASNT shares.
5. Consolidating Shares for Sale With Budhu's shares and the shares convertible from the note, Hackett controlled a total of 950,000 ASNT shares, which the group planned to sell during the pump-and-dump.
6. Planning the Promotion In October 2017, the group contacted a cooperating witness to promote ASNT's stock on TheMoneyStreet.com, aiming to generate buying volume for their planned dump.
7. Cooperating Witness Records Communications Unbeknownst to the group, the cooperating witness was recording their phone calls and preserving their electronic communications, capturing evidence of the scheme.
8. Hackett Sells to Undercover Agent As part of the scheme, Hackett sold ASNT stock to an undercover FBI agent, intending to create a matched trading scenario to further manipulate the price.
9. Targeting $5.00 Per Share The group agreed that once ASNT shares reached a target price of $5.00, Hackett would begin selling his shares, and the group would then split the proceeds.

The Enforcement Action

On November 18, 2024, the Court granted the SEC’s motion for summary judgment against Andrew Hackett based on his criminal conviction. The Court found Hackett violated Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. The Court granted the SEC’s requests for disgorgement and prejudgment interest (deemed satisfied by restitution in his criminal case), a permanent injunction, and a permanent penny stock bar. A judgment was entered on January 8, 2025.

Original SEC litigation release ↗ · Browse all cases