SEC to sue trader over fake Avon bid

By Simon Pitman

- Last updated on GMT

SEC to sue trader over fake Avon bid

Related tags Stock market

The US Stock Exchange Commission has confirmed that it is to sue the Bulgarian trader who filed fake documents purporting to a takeover bid for Avon Products.

A lawsuit was filed by the SEC last Thursday, naming 37 year-old Nedko Nedev, a resident of Sofia, Bulgaria, as the suspected culprit behind three fake takeover bid filings.

Nedev is also said to be responsible for filling two other similar takeover bids, all designed to boost his stakes in the businesses, through ‘contracts for difference’, which aim to boost share prices between a time a share contract is opened and when it is closes.

Faking it to make on it

Nedev filed the fake Avon takeover bid under the name PTG Capital, identifying the company as being based in London, when he was actually operating out of Bulgaria.

The other two filings were made to try and boost share values in the Tower Group International, Ltd and Rocky Mountain Chocolate Factory, Inc businesses.

The bogus offer, made on May 14, outlined that the private equity company would buy shares at $18.75, more than $11 over the trading share price at the time of the filing and one that valued the company in excess of $8.2 bn.

Avon share prices dip back to all-time low

The filing has brought to attention serious shortfalls in the SEC electronic filing system that have underlined both security breaches and the potential for fraud in the system.

But the initial fallout was positive for Avon, resulting in a much needed spike in its share price that was sustained for some time after it was revealed that the filing was bogus.

On the day of the filing, Avon’s share price shot up 20% to nearly $8 during mid-day trading, and finished trading on Monday, at $7.18 a share, when it had already been revealed that the filing was bogus.

Since then, Avon’s share price has slipped below the level prior to the fake filing, with share prices reaching an all-time low of $6.34 in trading on June 4th​.

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