SEC doles out P60-M in fines for Abra Mining mess

The SEC released a statement yesterday outlining P560 million in fines relating to the illegally-issued Abra Mining [AR suspended] [link] shares that were sold during the basura stock craze of late FY20 and early FY21. The PSE’s suspension of AR’s stock in May 2021 effectively killed that basura stock craze and trapped AR shareholders in the stock for three years with little in the way of information from the SEC, the PSE, or AR itself to guide expectations. The SEC’s statement said that AR illegally issued 169 billion shares of AR across 474 stock certificates, leading to a situation where AR had 258.96 billion shares lodged with the PDTC, but only 72.95 billion shares listed on the PSE. The SEC said that AR’s officers “had or should have had knowledge” of the circumstances of the illegality, and dismissed claims of lack of knowledge as “attributable to their gross negligence in the performance of their duties.” The SEC also revoked AR’s registration statement and certificate to offer and sell securities.

MB bottom-line: I acknowledge that this write-up doesn’t do any justice to any particular part of this story. To anyone who was trading the PSE during the first lockdown Christmas, this news will seem like a hilarious sidebar to what was already a ridiculous situation. AR was the poster child of the basurapalooza era as it launched from P0.001/share on 1 December 2020 to a peak of P0.011/share on 19 January 2021, a total rise of 1000% in just a little over six weeks’ time. To anyone who followed why AR was suspended, this news will hit as the bare minimum necessary conclusion to a scandal that shook the foundations of trust that every trader needs to have in the SEC, the PSE, and the system as a whole to facilitate trading of any kind, let alone trading at this scale. To anyone (like me) who has been in constant contact with the victims of this illegal activity – the shareholders in the public float – this news and the subsequent talk about AR’s delisting will ring hollow. Yes, we have a headline-grabbing aggregate fine that seems appropriate for a situation as bad as this, and those who personally participated in or should have known about the illegal activities have been prohibited from holding positions of authority for five years. But what about the public shareholders? The ?560 million in fines are to the SEC’s benefit. What about the systems that these actors used as a platform to perform this fraud on the public? What changes have been made to prevent something like this from happening again? I think there’s a huge amount of risk that we all assume as stock traders: market risk, liquidity risk, business risk, currency risk, financial risk, regulatory risk. The list is long, but this is the bargain that traders accept in return for the potential returns. The public should not have to accept “AR risk” as part of this bargain. I don’t have a great solution for this problem, but the fact that we’ve finally gotten to this point after three long years with no satisfactory resolution for the actual victims of this illegal activity tells me that all of the gains to be had are in outsized efforts to attack the weaknesses in the system that allowed this to happen in the first place, to prevent (as much as is reasonably possible) this from happening again. I’m pouring some of this coffee on the ground for my AR homies. 

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