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Crown Capital Management International Relations On the Largest International Penny Stock Frauds10 Years AgoSource
Nine
Individuals Indicted in One of the Largest International Penny Stock Frauds and
Advance Fee Schemes in History
BROOKLYN, NY—Earlier today, the Federal Bureau of Investigation (FBI) arrested six men in New York, Arizona, New Jersey, Florida,
and California for engaging in an international fraud conspiracy that spanned
the globe from North America to Europe and Asia. A seventh defendant was also
arrested today on a provisional arrest warrant in Ontario, Canada. The arrests
resulted from an indictment charging nine defendants with 24 counts of
securities fraud, wire fraud, and false personation of Internal Revenue Service
(IRS) employees in connection with the sale of securities and conspiracy (the
investigation showed that the identities used were fictitious and that no IRS
employees were involved in the scheme). As set forth in court filings, the
defendants masterminded securities fraud and advance fee schemes that
victimized investors in approximately 35 nations and generated more than $140
million through various brokerage and bank accounts under their control. To
uncover the international aspects of the scheme and gather evidence, the FBI
used wiretaps in the United States and undercover agents in foreign countries.
The indictment and arrests are the result of one of the largest
international penny stock investigations ever conducted by the Department of
Justice and the FBI and mark the unveiling of a multi-year, ongoing
investigation, which included significant assistance from the Royal Canadian Mounted Police (RCMP), as well as from other U.S. law enforcement agencies and
law enforcement authorities in England, as well as assistance from Thailand and
China.
The defendants are charged in two separate but interrelated
schemes. According to the indictment, the defendants first engaged in an
international "pump and dump" scheme during which they fraudulently
"pumped up" the share price of worthless penny stocks and then
"dumped" billions of shares of those stocks by unloading them on
unsuspecting victim investors across the globe. Second, the defendants operated
boiler rooms in at least four countries that induced investors in penny stocks,
including many of the same victims from the pump and dump scheme, to pay
advance fees that the defendants promised would enable the victim-investors to
sell their penny stocks and recover losses that they incurred. In reality, the
defendants simply stole the fees without providing any services, fraudulently
extracting millions of additional dollars from their victims.
The charges and arrests were announced by Loretta E. Lynch, United
States Attorney for the Eastern District of New York; George Venizelos,
Assistant Director in Charge, FBI, New York Field Office; Toni Weirauch,
Special Agent in -Charge, IRS, Criminal Investigation, New York; James C.
Spero, Special Agent in Charge, Homeland Security Investigations, Department of
Homeland Security, Buffalo; and Robert O’Malley, Special Agent in Charge,
Treasury Inspector General for Tax Administration (TIGTA).
The Pump and Dump Scheme
As alleged in the indictment, defendants Sandy Winick, Gary
Kershner, Joseph Manfredonia, Cort Poyner, Songkram Roy Shachaisere, and
William Seals orchestrated one of the largest international penny stock frauds
in history. First, the defendants gained controlling interests of huge
quantities of worthless stock in 11 public companies known in the industry as
"file cabinet businesses"—thinly traded companies with minimal assets
and non-existent business operations, which in many cases were mere shell
companies. They then pumped up the share prices of the companies’ stock by
engaging in fraudulent and illegal sales campaigns, which included distributing
false press releases, announcing non-existent business ventures and fake
mergers, posting false information on social media sites and bribing stock
promoters and brokers.
These efforts fraudulently inflated share prices so that the pump
and dump defendants could trade billions of shares of penny stocks that they
owned and controlled at a profit, ultimately generating more than $120 million
worth of fraudulent stock sales in accounts under their control. As a result of
the defendants’ efforts, investors in 35 countries were defrauded in connection
with their purchase of the companies’ stock.
To avoid detection, the defendants, many of whom operated from
outside the United States, were often careful to use “throwaway phones.” In
fact, defendant Poyner was intercepted on a wire communication reminding others
in the scheme to use such mobile devices to avoid being caught. The defendants
also knew that they should not draw attention to their illegal trading scheme.
For example, defendant Winick boasted about the superiority of the charged
scheme compared to another more obvious scam, stating, “That deal is obviously
a pump and dump. We know enough to be subtle.”
The Advance Fee Scheme
As the indictment alleges, defendants Winick, Gregory Curry, Kolt
Curry, and Gregory Ellis perpetrated a second scheme in which they fraudulently
induced penny stock victims to pay advance fees, on the promise that the
victims would then either be able to sell their securities to other waiting
investors or join lawsuits to reclaim their losses. In reality, the advance
fees were nothing more than a con, as neither the investors nor the lawsuits
existed. To hoodwink the penny stock owners, the advance fee defendants
invented fake trading companies and a fake law firm and then posed as employees
of those entities while soliciting advance fees from the penny stock victims.
To facilitate the scheme, the defendants established boiler rooms
or call centers from which members of the conspiracy would solicit advance fees
from the unsuspecting penny stock victims. The call centers were located in
various locales around the world, including Canada, Thailand, and the United
Kingdom. Recently, the defendants began planning to open a new call center in
Brooklyn, New York. Some of the victims were told that they either needed to
pay the advance fee to remove restrictions that were placed upon their penny
stock, which prevented the victims from selling their stock in the market, or
to join investors in a pending or anticipated lawsuit to recover losses that
they incurred while owning the penny stock. Victims were then told that the
advance fees were needed to convert the warrants of their stocks to a saleable
security. In several instances, the advance fee defendants even pretended to be
IRS employees collecting a bogus advance tax from victim investors before they
could unload their penny stocks (the investigation showed that the identities
used were fictitious and that no IRS employees were involved in the scheme).
The victims were directed to send payment of the advance fees to banks around
the world, including bank accounts in New York City. The fraud proceeds were
then transferred through a funds transfer network located in Getzville, New
York, to an account maintained in Beirut, Lebanon. Ultimately, these defendants
generated more than $20 million in fraudulently obtained advance fees.
Defendant Kolt Curry described the advance fee scheme in the
following way over an intercepted wire communication: “I would say that 100
percent of these stocks are like uh pink uh...just dumps...so...ya know they’re
totally, they’re like, so a lot of these guys are dying...to get rid of this
crap....The money is good, it’s easy. It’s easy money. Definitely easy money,
and it’s good money.” In fact, while bragging about his prowess as a fraudster,
defendant Kolt Curry further stated, “I had a guy send me a million dollars
over one phone call....He actually sent me almost two million dollars over the
period of the hit....I guess in the industry they coin it as a smash and grab.”
As for the group’s recent plans to open a call center in Brooklyn, New York,
defendant Kolt Curry said, “I tell you what man...hitting the Americans would
be like taking money from a baby.” |