A British Columbia accountant has reached a settlement with United States regulators, agreeing to significant penalties and industry bans for his alleged involvement in two massive penny stock frauds that generated more than US$150 million in illicit proceeds.
The SEC's Allegations and Settlement Terms
In a civil complaint filed in the U.S. District Court for the Southern District of New York, the Securities and Exchange Commission (SEC) alleged that George John Drazenovic, a 55-year-old licensed accountant from Burnaby, B.C., assisted in fraudulent stock schemes from at least April 2010 to October 2019. The SEC claimed Drazenovic worked with at least two distinct groups orchestrating the frauds.
Without admitting or denying the allegations, Drazenovic signed a proposed final judgment, which is pending court approval. The settlement imposes a permanent ban on his participation in U.S. penny stock offerings, typically defined as stocks trading under $5. He is also barred from serving as an officer or director of any public company for three years.
Financially, Drazenovic is ordered to pay fines and disgorge alleged illicit gains plus interest, totaling more than $600,000 US. The settlement further restricts him from persuading others to buy or sell securities unless the stock is publicly traded and the issuing company has maintained a market value of at least US$50 million for 90 consecutive days.
Details of the Fraudulent Schemes
The SEC's complaint outlines a classic pump-and-dump operation. In such schemes, conspirators secretly accumulate large positions in low-priced, often obscure stocks. They then use false and promotional statements to artificially inflate, or "pump," the stock's price. Once the price is elevated, they "dump" their shares for a substantial profit, leaving unsuspecting investors with worthless securities.
According to the SEC, Drazenovic's role was central to creating a facade of legitimacy for the schemes. The complaint alleges he helped locate mining and oil and gas property rights for ten different companies. These properties were often situated near existing projects, making them appear promising. The rights were then used as key promotional tools to lure investors, despite minimal actual resources being dedicated to exploration or extraction.
All the stocks involved were traded on the U.S. over-the-counter (OTC) market, a decentralized network known for hosting smaller, riskier companies not listed on major exchanges like the NYSE.
Professional Consequences and Related Actions
In a related administrative proceeding, Drazenovic agreed to an order that prohibits him from appearing or practicing before the SEC as an accountant. This action effectively bars him from preparing or auditing financial statements for any publicly traded company in the United States.
The SEC alleged that Drazenovic acted with reckless disregard for the fact that the groups he assisted controlled and funded the stocks, with no genuine intent to develop the underlying resource projects.
George John Drazenovic could not be reached for comment by journalists. His settlement marks another enforcement action by U.S. authorities targeting cross-border financial misconduct, underscoring the long reach of American securities law even for professionals based in Canada.
