The market regulations unit of the Nigerian Stock Exchange (NSE) is putting finishing touches to an on-going investigation that would see anti-graft agency, the Economic and Financial Crimes Commission (EFCC), go after Milost Global, Inc and other market operators found guilty of any wrongdoing or aiding an alleged share pump and dump activity in Nigeria.
A pump and dump scheme is the fraudulent practice of encouraging investors to buy shares in a company in order to inflate the price artificially, and then sell one’s own shares while the price is high.
BusinessDay learnt that the Nigerian Stock Exchange (NSE) has commenced an investigation into Milost following confusing statements issued by parties at the centre of the announced transactions.
Informed sources told BusinessDay that NSE forced Unity Bank to make a statement last Thursday where the latter said that contrary to claims made by Milost, it did not lie on the facts presented to the investing public over a purported $1 billion financing deal.
While the coast is yet to be cleared for Unity Bank, the Nigerian bourse has commenced investigation into the likes of Japaul oil servicing company and Resort Savings, both of which are listed and have dealings with Milost, as announced by the purported Private Equity firm.
Culpable parties will face steep regulatory sanctions, according to an inside source.
“None of the parties in the transaction chain is left out of the wide sweeping investigation that would involve the EFCC,” the source added.
Barely a year ago, the EFCC activated its partnership on market surveillance with the NSE to put an end to increased infractions in the capital market.
This was in furtherance to the Memorandum of Understanding (MoU) signed between both parties in 2013 towards tackling market infractions and abuse.
Amid investigations, Milost continues to claim that its Equity Subscription Agreement (MESA) is not for pump and dump.
The MESA instrument, according to Milost, is aimed at funding “undervalued publicly quoted companies all around the world and is a hybrid of debt and equity.”
“In any investigation you don’t go with a closed, mind. It will definitely be a thorough one,” another source close to the NSE council members said.
US-based Milost has made the rounds in the past month over a number of high profile announcements to invest some $3 billion in Nigerian companies, a strategy that has put retail investors on the receiving end of movement in stock prices of the firms in the news.
The private equity firm threatened to file a $500 million (N180 billion) lawsuit against BusinessDay and two of its journalists, for publishing what it called false information.
Leading up to Milost’s threat to file a lawsuit against BusinessDay, the latter published two separate articles on the private equity firm and its planned investments in a number of Nigerian companies.
The first of these articles was published March 12 and titled “The Math doesn’t add up with Milost” with the second being “Milost sued in New York for fraud, violating US securities exchange law.”
Milost did not fault the court document which showed it was facing six different charges bothering on fraud at the New York Southern District Court.
Up until the time of filing this report, no such lawsuit has been filed against BusinessDay by Milost.
Another source close to the development said the NSE will this week tell investors the direction of its investigation.
The investigation will not exclude stock broking firms, said another insider source close to the broker-dealers regulation department.
“The sanctions will be massive and the investigation will cut across even those that had anything with Milost before now. It is just that the exchange does not give awards, but BusinessDay efforts in the whole process deserve an award,” our source added.
BusinessDay investigations show that Milost Global Inc, office address stated on its website as 48 Wall Street, 11th Floor New York, NY 10005 USA, is a virtual office or Business Centre owned by the Rockefeller Group.
According to information from the Rockefeller Group website “Enjoy the benefits of a prominent business address, without the expense of a physical office space. With locations in Midtown and Downtown Manhattan, you can get the best address at 48 Wall Street. Our Virtual Office Space options can include: a prestigious business address to meet with staff or clients, private telephone number with 212 area code, personalized telephone answering and call screening, access to conference and meeting rooms at discounted rates.”
Businesses that use virtual offices (which are usually shared with others) are usually small start ups unable to meet the cost of a full fledged office of their own.They pay a monthly service fee to use the phone and mailing address for their own needs and meet with customers in the conference room to present a professional appearance.
Milost claims to have over $25 billion in committed capital.
A BusinessDay reporter in New York tried to book an appointment to visit Milost’s New York office, but a lady who received the call said she would connect him to the appropriate person to speak to, but the call was disconnected and subsequent calls were ignored.
Our New York reporter also made inquiries about Milost from a source at a big private equity firm and a journalist, both based in New York but no one seems to know the firm, which claims it is doing billion dollar funding deals with Nigerian companies.
IHEANYI NWACHUKWU & LOLADE AKINMURELE
