Securities Fraud: Unregistered Representatives Bilk Investors of Over $5M & Go Shopping, Broker to Go to Prison Over $131M Market Manipulation Scam, and an Illinois Man is Convicted in $20M Scheme

SEC Files Fraud Charges Against Unregistered Representatives in $5M Fraud
The U.S. Securities and Exchange Commission has obtained an asset freeze against Matthew White, Daniel Merandi, and Rodney Zehner for alleged financial fraud. The three men are not registered to sell investments. They are accused of raising over $5M from investors and spending the money on expensive shopping expeditions.

According to the SEC, Merandi, White, and Zehner fraudulently issued $1B in unsecured corporate bonds using their shell company. They said the funds would go toward developing a resort. Although they never raised enough money to begin the project, they took $5.6M that they did raise from investors and went shopping at Gucci, Prada, Saks Fifth Avenue, Versace, and Louis Vuitton. The men allegedly conducted bogus transactions to raise the bond’s price even though the securities were expired and had no value.

The Commission is accusing Merandi, White, Zehner, and their companies of violating the Securities Act of 1933’s Section 17(a) antifraud provision, the Exchange Act of 1934’s Section 10(b), and Rule10b-5. It wants permanent injunctions, penalties, and disgorgement.

Broker Pleads Guilty to Fraud Involving $131M Market Manipulation Scam
Registered broker Naveed Khan has pleaded guilty to securities fraud. Khan faces up to 20 years behind bars for his involvement in a $131M pump-and-dump scam that involved the market manipulation of ForceField Energy Inc. (FNRG).

Between 1/09 and 4/15, the defendant and others sought to bilk ForceField investors. The fraudsters are accused of using nominees to sell and buy the LED company’s stock without notifying current investors and potential ones, orchestrating trading to make it seem as if the public was interested in ForceField’s stock, and hiding payments made to brokerage firms and stock promoters. These broker-dealers purportedly marketed and sold the stock under the guise of being independent.

As a result, say prosecutors, the investing public lost about $13M. Meantime, Khan received kickbacks for buying ForceField stock using clients’ accounts. The kickbacks were not disclosed to clients. Khan and others hid their scam by using disposable prepaid cell phones and applications that could encrypt messages. They paid the kickbacks in cash.

Illinois Man Could Face 20 Years in Prison for $20M Scam
Jeffrey Wilson was convicted of 19 counts of securities fraud and other criminal charges, including filing false reports with the SEC, falsely certifying the reports, and lying to federal investigators and an outside auditor. The case against Wilson, an Illinois man, is related to federal convictions against brothers Craig, Chad, and Chris Ducey, Katirina Tracy, Joseph Furando, and Brian Carmichael, who have all pleaded guilty to tax fraud, conspiracy to commit wire fraud, and other criminal charges.

The scam involved the purchase of biodiesel through New Jersey companies even though the fuel already had been used to claim Environmental Protection Agency renewable fuel credits and tax credits. The Duceys and Carmichael purchased the biodiesel from Tracy and Furando, pretending that they made the fuel.

Over $140M in revenue was made in the scam, as well as $56M in criminal profits. The case against Wilson involved $25M in attempted fraud and more than $20M in investor losses.

Registered Broker Pleads Guilty To Securities Fraud For Particpating In A $131 Million Market Manipulation Scheme, United States Department of Justice, February 27, 2017

The SEC Complaint in the Case Against White, Zehner, and Merandi (PDF)

Securities Fraud Related to Biodiesel Fraud Scheme Convicted in Jury Trial, DOJ.gov, July 21, 2016