Shares of cryptocurrency company Riot Blockchain (NASDAQ:RIOT) were tumbling over 20% in after-hours trading after it was revealed that the company’s CEO John O’Rourke has resigned suddenly.
In his place, Chris Ensey has been named interim CEO and the new chairman of the board is Remo Mancini.
O’Rourke has resigned in the wake of unrelated charges by the U.S. Securities and Exchange Commission (SEC) against him for alleged fraud in connection with other companies. O’Rourke has been the company’s CEO since November of last year.
The SEC revealed charges against a group of 10 people and their associated entities for long running fraudulent schemes that brought in more than $27 million. Barry Honig, a Florida investor who at one point was Riot’s largest shareholder, is also named in the SEC complaint. The SEC has referred to the individuals who had been charged as “microcap fraudsters” in a press release.
“Honig was the primary strategist, calling upon other Defendants to buy or sell stock, arrange for the issuance of shares, negotiate transactions, or engage in promotional activity,” according to the SEC complaint.
“In each scheme, Honig orchestrated his and his associates’ acquisition of a large quantity of the issuer’s stock at steep discounts, either by acquiring a shell and executing a reverse merger or by participating in financings on terms highly unfavorable to the company,” the complaint also said.
There were “three highly profitable ‘pump-and-dump’ schemes perpetrated by Honig, [John] Stetson, [Michael] Brauser, O’Rourke, [Mark] Groussman, and [Phillip] Frost (the founder of Opko Health), and their entities,” the complaint alleged.
According to the SEC, the defendants also arranged and paid for stock promotion. “Honig then directed O’Rourke to write a promotional article, which O’Rourke published under the pseudonym ‘Wall Street Advisors’ on Seeking Alpha,” the complaint reads.
“[O’Rourke] also knowingly and falsely claimed ‘not receiving compensation'” for writing the article.
Riot was not named as part of the SEC complaint.