Fraud

FBI Arrests Three More People Involved in Securities Fraud

Four “pump-and-dump” stock price manipulation schemes investigated by FBI and SEC

The US Attorney’s Office for the Eastern District of New York has charged two securities brokers and a lawyer with participation in a $300-million market manipulation scheme, the Federal Bureau of Investigation reported in a press release.

Pumping and Dumping

The scheme involved the marketing of stocks that were practically worthless, in a bid to inflate their price and collect the profits selling at a certain level. One of the stocks is that of CodeSmart Inc., a software consultancy firm. The Securities and Exchange Commission (SEC) yesterday suspended trade in the shares because the firm has failed to file any regular reports since June last year, the SEC said. The two brokers and the lawyer also took part in similar schemes, called “pump and dump”, involving another three companies: Cubed, StarStream Entertainment and The Staffing Group.

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Pumping and dumping, as the name suggests, involves purchasing stock at low prices, then manipulating the trading volumes so the prices jumps, and then getting rid of them at a profit.

False press releases and misleading filings to SEC inflated stock prices

In each of the cases, the FBI said, Manhattan-based attorney Darren Ofsink, and brokers Michael Morris and Darren Goodrich issued false press releases and misleading filings to SEC in order to increase the attractiveness of these companies’ shares and convince retail investors to buy them, in the period between 2012 and 2014. When the stock reached a price level desirable by them, they sold their own holding in these companies at a profit. They also engaged in unauthorized stock purchases on behalf of unaware investors.

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11 People Implicated so Far

This latest sweep in the investigation has been going on since last year. A further four alleged participants in the scheme were charged with several counts of fraud in the summer of 2014: Abraxas J. Discala, Chief Executive (CEO) of OmniView Capital Advisors, Ira Shapiro, the Head of CodeSmart, Craig Josephberg, a broker, and Kyleen Cane, another attorney. An additional three people involved in the schemes – Marc Wexler, broker Matthew Bell, and Victor Azrak – have pleaded guilty.

 

The Securities and Exchange Commission has also named Ronald Heinemann, Morris’ partner in his company Halcyon Cabbot Partners, as involved in the scheme.

 

 

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