Articles Posted in Pump and Dump Scams

FINRA Accuses John Carris Investments of Pump-and-Dump Scam

Published on: September 30, 2013 | by Shepherd Smith Edwards & Kantas, LLP

The Financial Industry Regulatory Authority is charging John Carris Investments LLC with misleading and bilking investors. It seeks a cease and desist order against the financial firm and George Carris, its CEO, to immediately stop soliciting customers to buy Fibrocell Science, Inc. stock without giving them the correct disclosures. The SRO contends that in May 2013, JCI made solicitations to customers without revealing that Carris and another principal of the firm were selling their shares.

In an amended complaint, FINRA accused Carris, JCI, and five other firm principals of committing securities violations and other fraud. The SRO alleges that as JCI played the role of placement agent for FIbrocell, the firm and Carris artificially inflated Fibrocell stock’s price by pre-arranging trading and making Fibrocell stock buys that were not authorized in the accounts of customers.

FINRA contends that JCI and Carris fraudulently sold notes and stock in Invictus Capital, Inc., the firm’s parent company, without disclosing that its financial state was poor. The SRO believes that there was no reason to believe that investors would gain anything economically and Carris and JCI misled investors of Invictus by paying dividends to the latter’s early investors with funds that came from the sales of the company’s securities. Also, FINRA is accusing JCI of putting out false documentation that did not show payments the firm made for Carris’s personal spending and not remitting employee payroll taxes to the US Treasury.

Broker-Dealer, Attorneys, Stock Promoters and others charged in “Pump-and-Dump” Scam Involving Tradeshow Marketing Company and Pacific Blue Energy

Published on: March 15, 2013 | by Shepherd Smith Edwards & Kantas, LLP

The Securities and Exchange Commission is charging Canadian stock promoters James Hinton, John Kirk, and Benjamin Kirk, and their associates with employing misleading and false promotions to inflate trading in two microcap companies. As a result, they allegedly made millions of dollars after dumping their shares in a pump-and-dump scheme.

Also charged are California-based lawyers Wade Huettel and Luis Carillo, who allegedly assisted Kirk, Hinton, and Kirk in hiding their ownership stakes in the companies by putting together public filings that were misleading and giving legal opinions that were also intended to lead others astray, and Gibraltar Global Securities, which is a brokerage firm located in the Bahamas. The broker-dealer is accused of issuing misleading statements and fake affidavits that let one of the stock promoters sell shares of the company he was pushing in secret. Meantime, Carrillo Huettel LLP, the law practice of Luis and Carillo, was allegedly given stock sale proceeds disguised as a fake “loan” in secret.

The regulator contends the Luniel de Beer, the president of Tradeshow Marketing Company Ltd. and chairman of Pacific Blue Energy Corporation, was paid over $330,000 in secret kickbacks for his alleged involvement in the pump-and-dump scam. Pacific Blue President Joel Franklin, whom the SEC accused of misleading representations and playing a role in the stock sales being able to happen, has already settled the Commission’s charges against him. As for the others mentioned above (and in the SEC’s securities case), they are charged with violating US anti-fraud rules and laws, as well as US securities laws.

Securities Law Roundup: Ex-Morgan Stanley’s SEC Settlement Over Alleged FCPA Violations Gets Court Approval, Corruption Probe Into Wal-Mart’s Mexico Activities Continue, and Sentry Global Securities Principal Gets 20-Years for Pump-and-Dump Scam

Published on: May 24, 2012 | by Shepherd Smith Edwards & Kantas, LLP

A district court has approved ex-Morgan Stanley (MS) executive Garth Peterson’s civil settlement with the Securities and Exchange Commission over alleged Foreign Corrupt Practices Act violations. In SEC v. Garth Peterson, the plaintiff agreed to pay $241,589 in disgorgement and give up his interest in an apartment building in China. He is to work with an SEC-appointed receiver. Peterson has entered a guilty plea to related criminal charges.

According to the Commission, while working at Morgan Stanley’s real estate investment and fund advisory business, Peterson secretly obtained real estate investments worth millions of dollars from the financial firm’s funds not just for himself but also for others, including the ex-chairman of a Chinese state-owned entity that could influence Morgan Stanley’s real estate business in that country. Peterson, the official, and a Canadian lawyer are accused of acquiring a direct interest in the Jin Lin Tiandi Serviced Apartments. The Commission has said that Peterson violated the FCPA’s anti-bribery and internal control provisions, as well as aided and abetted violations of the 1940 Investment Advisers Act’s antifraud provisions.

In other allegations of Foreign Corrupt Practices Act violations, Wal-Mart (WMT) is accused of not just committing them but also of covering up its alleged misconduct. An investigation into the accusations was opened up in April.

Wal-Mart executives are accused of concealing possible corruption (including bribery) by company executives and officials in Mexico, where the retail chain has been working to build its presence. Now, House Energy and Commerce Committee ranking member Henry Waxman (D-Calif.) and House Oversight Committee ranking member Elijah Cummings (D-Md.) want the store’s CEO Michael Duke to let a former general counsel cooperate with their investigation.

In a letter to Duke, the two lawmakers said that there are several hundred internal documents that seem to confirm early reports of the scandal. At the time of the alleged cover up, then-Wal-Mart general counsel Maritza Munich had tried to get company’s board to expand its probe into the accusations and put into place a tough anticorruption policy. However, when she left Wal-Mart in 2006, Albert Mora, the person who replaced her, chose not to investigate further. Now, Waxman and Cummings want Wal-Mart to allow Munich to get involved in the current probe. They also are once more putting forward an earlier request that the retail giant give them a “substantive briefing” about the specific bribery allegations related to Mexico.

Meantime, Sentry Global Securities and Red Sea Management principal Jonathan Curshen has been sentenced to two decades behind bars for his conviction in a pump and dump stock manipulation scheme. He was found guilty of wire fraud, conspiracy to commit securities fraud, mail fraud, and conspiracy to commit international money laundering. He also has to forfeit about $7.3 million.

Curshen, stock promoter Nathan Montgomery, and their co-conspirators are accused in taking part in coordinated trades while with issuing false statements to the press. According to the US Department of Justice, the alleged misconduct, which is said to have occurred in 2007, was committed to raise the price of C02 Technologies stock. While co-conspirators “pumped,” Curshen and others “dumped” by selling the shares through his two Costa Rica brokerage companies. The shares then virtually lost all their value.

SEC v. Garth Peterson

Foreign Corrupt Practices Act, US DOJ
Read the letter to lawmakers’ Wal-Mart CEO Duke, BNA, (PDF)

CO2 Tech’s Curshen receives 20 years in jail, Stockwatch, May 14, 2012

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SEC Issues Alert for Broker-Dealers and Investors Over Municipal Bonds, Man Who Posed As Investment Adviser Pleads Guilty to Securities Fraud, and Citigroup Settles FINRA Claims of Excessive Markups/Markdowns, Stockbroker Fraud Blog, April 10, 2012

UBS Puerto Rico Settles SEC Action for $26M, Morgan Keegan’s Bid to Get $40K Award Over Marketing of RMK Advantage Income Fund Vacated is Denied, and SEC Settles with Attorney Involved in $1B Viaticals Scam, Stockbroker Fraud Blog, May 11, 2012

SEC Seeks Approval of Settlement with Ex-Bear Stearns Portfolio Managers, Credits Ex-AXA Rosenberg Executive for Help in Quantitative Investment Case; IOSCO Gets Ready for Global Hedge Fund Survey, Institutional Investor Fraud, March 29, 2012 Continue Reading ›

Daniel “Rudy” Ruettiger Faces SEC Charges Over Pump-and-Dump Scam Involving Sports Drink Company

Published on: December 19, 2011 | by Shepherd Smith Edwards & Kantas, LLP

18 years after he was immortalized in the movie “Rudy,” Daniel Ruettiger and 12 others now face Securities and Exchange Commission charges. They are accused of misleading investor to get them to purchase stock in Ruettiger’s sports drink company Rudy Nutrition. Their alleged pump-and-dump scam resulted in over $11 million in illicit profits.

To settle the SEC securities charges, Ruettiger has consented to pay $382,866, while 10 of the others agreed to final judgments. By settling, they are not admitting to or denying any wrongdoing.

Per the SEC’s complaint, although Ruettiger’s sports drink company manufactured the drink called Rudy, Rudy Nutrition was actually a way for Ruettiger’s and his alleged co-conspirators to run their financial scheme. The Commission says that penny stock promoter Stephen DeCesare, who was brought in to turn Ruettiger’s company into a publicly traded one, was the main organizer of the pump stock scam. After Rudy Nutrition was given the ticker symbol RUNU, DeCesare and disbarred California attorney Kevin Quinn arranged for nominee entities to get three billion RUNU shares. The entities sold nearly one billion of them to investors through the public market. Other penny stock promoters then joined forces with DeCesare to engage in manipulative trading and fraudulent touting.

The SEC says that promoters involved in the pump-and-dump scam took part in manipulative trading so that Rudy Nutrition’s stock price would artificially inflate. Meantime, investors who were allegedly given misleading statements and false information through press releases about the company, as well as via promotional materials, were sold unregistered shares.

The misleading statements and bogus information were sent to millions via mailers, online chat rooms, and videos posted on the Internet. In less than four week, RUNU was trading 3 million shares (up from 720 shares). Within 14 days RUNU’s stock price went from a quarter to $1.05.

In September 2008, the SEC suspended trading because RUNU was delinquent with its periodic filings. This brought the pump-and-dump scam (the alleged fraudsters were conspiring to put out another two billion shares that they would dump at the end of the month) to a halt. The Commission took back Rudy Nutrition securities’ registration in November 2008.

Other participants slapped with SEC charges:
• Rocky Brandonisio, Rudy Nutrition President • Stephen DeCesare, penny stock promoter • Kevin Quinn, attorney and business consultant • Kevin Kaplan, Rudy Nutrition CFO • Pawl Dynkowski, stock promoter • Mehmet Mustafoglu, Rudy Nutrition consultant • Gregg Mulholland, stock promoter • Joseph Padilla, ex-registered representative at Scottsdale Capital Advisors and stock promoter • Andrea Ritchie, registered representative with Scottsdale Capital Advisers • Gary Yocom, registered representative with Thomas Anthony and Associates • Angelo Panetta, stock promoter • Chad Smanjak, stock promoter
Pump-and-Dump Scams
Usually involves stocks that are promoted and then sold when the price goes up enough due to a rise in interest because of the endorsement. This allows those involved in running the pump and dump scheme to make a significant short-term profit.

SEC Complaint (PDF)

More Blog Posts:
FBI Arrests Texas Leader of Pump-and-Dump Scheme, Stockbroker Fraud Blog, March 23, 2011
Ex-Gilford Securities Broker Indicted in International Stock Fraud Scam Involving Pump and Dump of Israeli and Chinese Securities, Stockbroker Fraud Blog, February 19, 2011
Pump & Dump Scam Alleged in $600 Million Lawsuit Against Law Firm Baker & McKenzie, Institutional Investor Securities Blog, April 13, 2011 Continue Reading ›

Pump & Dump Scam Alleged in $600 Million Lawsuit Against Law Firm Baker & McKenzie

Published on: April 13, 2011 | by Shepherd Smith Edwards & Kantas, LLP

Industrial Enterprises of America Inc. (IEAM) is accusing Baker & McKenzie, LLP and former partner Martin Weisberg of securities fraud. The $600 million lawsuit, filed in US Bankruptcy Court, accuses the defendants of setting up a legal structure that allowed for an illegal pump-and-dump scheme and causing the company to sustain $150 million in losses and investors to lose $450 million. Facing criminal fraud charges over the scam are Weisberg and ex-CEOs John D. Mazutto and James W. Margulies.

Industrial Enterprises of America says that Weisberg was the one who helped set up its 2004 stock option plan, which provided for the issuance of restricted shares to employees, consultants, and outside directors. Rather than rewarding the Pittsburgh chemical company’s employees, the strategy was to use “print money” for company executives, their girlfriends, and lawyers.

The plaintiff says that since Weisberg was the beneficiary of the sale of the stock, which was improperly issued, the law firm ignored what was going on while helping IEAM officials steal from the company. Industrial Enterprises of America also contends that there were false and misleading SEC and NASDAQ filings and internal corporate malfeasances were set up to “raid the company of its working capital.”

One year after Industrial Enterprises of America filed for bankruptcy in May 2009, Mazzuto was charged over the allegedly $60 million stock fraud scam. He is accused of issuing shares worth tens of millions of dollars to relatives, friends, and other people he personally knows, which fraudulently inflated the value of the stock.

An indictment said that an attorney trust account that Margulies opened received the most company shares—3.5 million shares that he sold for $17.7 million. About $13 million went back to Industrial Enterprises of America. The remaining funds went to accounts that he and Mazzuto controlled.

Industrial Enterprises of America says that Mazzuto personally made $15 million from the stock scam, Margulies gained $6 million, and Baker & McKenzie earned over $1.7 million in fees. The plaintiff wants restitution for the full value of the shares that were improperly issued, as well as compensation for unspecified damages.

Related Web Resources:

Baker & McKenzie Sued For $600 Mln Over ‘Pump And Dump’ Scheme, Morningstar, December 4, 2011

More Blog Posts:
FBI Arrests Texas Leader of Pump-and-Dump Scheme, Texas Stockbroker Fraud Blog, March 23, 2011

Ex-Gilford Securities Broker Indicted in International Stock Fraud Scam Involving Pump and Dump of Israeli and Chinese Securities, Stockbroker Fraud Blog, February 19, 2011

FBI Arrests Texas Leader of Pump-and-Dump Scheme

Published on: March 23, 2011 | by Shepherd Smith Edwards & Kantas, LLP

FBI agents have arrested Christopher Rad, a Texas man who is charged with one count of conspiracy to commit securities fraud and transmit email messages. Rad, 42, is the alleged ringleader of an international securities fraud group accused of working with botnet operators, hackers, and email spam in a pump-and-dump scam.

Between November 2007 and February 2009, Rad allegedly acted as the middleman between computer experts, who know how to inflate a stock’s value, and stock promoters. The FBI says that he agreed to work with others to trade manipulated stock between themselves to make it appear as if the stocks were active. The hackers that he worked with would break into third-party brokerage accounts, liquidate the stocks, and use the balance to buy shares of the manipulated stock. They also allegedly distributed viruses so that computers around the world became infected. This created a “botnet,” a virtual army of computers that would then send out spam to promote the manipulated stocks. The pump-and-dump scheme let the fraudsters obtain control of “penny stocks” that weren’t traded on major exchanges.

If convicted, Rad end up behind bars for five years. He faces a $250,000 fine.

Alleged Pump and Dump Stock Manipulation Scam Leads to Indictment of Six, Including a Securities Attorney

Published on: February 27, 2011 | by Shepherd Smith Edwards & Kantas, LLP

An indictment has been unsealed today accusing six people of securities fraud in a stock manipulation scam that bilked investors between 2003 and 2008. The Securities and Exchange Commission has also filed a civil complaint related to this case.

The defendants are securities attorney Michael Simon Krome, Jonathan Randall Curshen, Robert Lloyd Weidenbaum, Ronald Salazar Morales, Izhack Zigdon, and Eric Ariav Weinbaum. They are accused of illegally manipulating stock prices in a pump and dump scam.

Per the indictment, Weinbaum and Zigdon allegedly took charge of the outstanding shares of CO2 Tech, a company that traded in the over-the-counter market through Pink Sheet listings. They are said to have gotten the shares by hiring Krome, who allegedly took action to avoid federal securities registration requirements so that his co-conspirators would get millions of “free-trading” CO2 Tech shares that were unregistered and otherwise could not have been legally obtained. The shares were then allegedly sold to the general public through Sentry Global’s stock trading floor. Curshen was the principal of Sentry Global Securities and Red Sea Management, which are both based on Costa Rica.

Weinbaum and Zigdon are accused of paying Weidenbaum about $1 million to take part in bogus CO2 stock trades to make it seem as if actual investors were purchasing them. False press releases were also allegedly issued to make it seem as if CO2 Tech had substantial business prospects. After “pumping” the market price and demand, the defendants would “dump” the shares by selling them for substantial profit through the Pink Sheet listings. Frequently, these shares were practically worthless.

Related Web Resources:

Securities Attorney and Five Others Indicted for Conspiracy, Wire Fraud, and Mail Fraud in Stock Manipulation Scheme, FBI, February 18, 2011

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Ex-Gilford Securities Broker Indicted in International Stock Fraud Scam Involving Pump and Dump of Israeli and Chinese Securities, Stockbroker Fraud Blog, February 19, 2011

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Ex-Gilford Securities Broker Indicted in International Stock Fraud Scam Involving Pump and Dump of Israeli and Chinese Securities

Published on: February 19, 2011 | by Shepherd Smith Edwards & Kantas, LLP

Gregg M. Berger, an ex-Gilford Securities broker, has been indicted for conspiracy over his alleged involvement in a global pump and dump stock fraud scheme involving thinly traded Israeli and Chinese securities. He is charged with wire fraud and securities fraud. The SEC has also filed related civil securities fraud charges against Berger, a number of other individuals, and three companies. The commission is seeking permanent injunctions, civil penalties, disgorgement, and a penny stock bar against Berger. Federal investors discovered the pump and dump scam following a multi-year probe.

According to prosecutors, between January 2005 and December 2007, Berger allegedly conspired with How Wai Hui, Francis A. Tribble, Scott Bradley, Alan Ralsky, and others to execute a stock scam that resulted in the sale of about 30 million shares of stock. Berger made over $600,000 in commissions and his co-conspirators generated about $30 million.

Defendants are accused of using spam emails to manipulate the thinly traded stocks. The recipients who bought the stock would drive the share price up and that is when Berger and co-conspirators would sell their shares at the new prices.

The indictment says that Berger was the stockbroker for the scam. He set up the brokerage accounts, arranged it so that stocks could be transferred to the accounts, executed the stock trades, transferred proceeds to specific bank accounts, provided confidential account information details to co-conspirators that were not supposed to receive this data, and did not obtain account holders’ consent. Stocks sold in the pump and dump scheme included those from Pingchuan Pharmaceutical Inc., China World Trade Corporation, World Wide Biotech and Pharmaceutical Co., China Digital Media Corporation, m-Wise, and China Mobility Solutions.

Related Web Resources:
SEC v. Berger, United States District Court, E.D. Michigan

Securities and Exchange Commission v. Gregg M.S. Berger, et al., Case No., 2:11-CV-10403 (RHC-PJK) (E.D. Mich.), SEC, February 1, 2011

More Blog Posts:
Dallas Securities Attorney and Former SEC Litigator Convicted of Fraud in Pump and Dump Stock Scam, Stockbroker Fraud Blog, February 11, 2010
Pump and Dump Scheme Involving Prime Time Stores Inc. Sends Global Spam Levels Up 30%, Stockbroker Fraud Blog, September 5, 2007
“Pump and Dump”, Annuities, Real Estate, Affinity Fraud and “Free Lunch Seminars” Are Top Scams in 2007 Say State Securities Regulators, Stockbroker Fraud Blog, May 21, 2007 Continue Reading ›