NASSAU, BAHAMAS — Ten people – one of whom was arrested in The Bahamas – have been indicted in an international stock manipulation ring that targeted retail investors and generated over $100 million in illicit proceeds.
The scheme spanned the globe and the 10 defendants charged were residents of Canada, the United Kingdom, Bulgaria, Spain, Monaco, Turkey and The Bahamas, according to documents.
Ronald Bauer was arrested in the United Kingdom. Curtis William Lehner, Courtney Vasseur and Julius Csurgo were arrested in Canada. Anthony Korculanic was arrested in Spain. Petar Mihaylov was arrested in Bulgaria. Domenic Calabrigo was arrested in the Bahamas.
The United States intends to seek the extradition of Bauer, Lehner, Vasseur, Csurgo, Korculanic, Mihaylov, and Calabrigo to the United States. Craig Auringer, a citizen of Canada and resident of the United Kingdom; Hasan Sario, a citizen and resident of Turkey; and Daniel Ferris, a citizen of the United Kingdom and resident of Monaco, were also charged and remain at large.
The defendants allegedly participated in “pump-and-dump” schemes that followed a typical pattern. First, the defendants and their co-conspirators secretly amassed control of the vast majority of the stock of certain publicly traded companies that were traded on the over-the-counter (OTC) market in the United States.
Second, the defendants and their co-conspirators then manipulated the price and trading volume for these stocks, causing the share price and trading volume to become artificially inflated, through coordinated trading and false and misleading promotional campaigns that they funded.
Third, and finally, the defendants sold out of their secretly amassed positions at these inflated values at the expense of the investing public.
In furtherance of the scheme, the defendants used a network of nominee entities to trade shares and funnel proceeds of these schemes back to the defendants and their co-conspirators.
Holding the shares through the network of nominee entities allowed the defendants and their co-conspirators to conceal the fact that, in reality, they controlled the vast majority of the shares of the issuer.
The securities that the defendants and their co-conspirators sought to manipulate were issued by small companies, were thinly traded, and typically traded at less than $2 per share. These publicly traded shell companies frequently had few, if any, actual assets or actual business operations.
While on paper the defendants and their co-conspirators had no connection to these companies, in reality, they exercised substantial control, including installing management at the companies, financing the companies’ operations, and funding payments for attorneys in order to prepare public filings with OTC Markets Group Inc. and the Securities and Exchange Commission (SEC).
In order to attract investor interest, the defendants and their co-conspirators, at times, caused private businesses to be merged or “vended” into the publicly traded shell companies. The private businesses were often in industries likely to attract the investing public’s interest.
In connection with the scheme, the defendants and their co-conspirators frequently engaged in manipulative trading activity in order to artificially increase the trading volume and share price of the stocks.
This manipulative trading included, at times, coordinated “match” trades in which the defendants and their co-conspirators caused one nominee entity or other brokerage accounts subject to their control to sell a certain quantity of shares while causing another nominee entity or brokerage account subject to their control to buy a similar quantity of shares that same day.
These match trades, which often occurred on days when there was low trading volume, had the effect of artificially increasing the share price and trading volume of the stock.
As part of the “pump-and-dump” schemes, the defendants and their co-conspirators financed and coordinated promotional campaigns through which promotional materials touting the stocks were distributed to the investing public.
These stock promotional materials frequently contained false and misleading claims about the issuer, as well as omitting material information, with the objective of inducing retail investors to purchase the shares of the issuer, which allowed the defendants and their co-conspirators to sell their substantial positions for a profit.
The defendants and their co-conspirators often expended hundreds of thousands of dollars on these stock promotion campaigns. Furthermore, certain of the defendants used a “boiler room” to solicit investors, including investors based in the United States, to purchase shares of certain of the companies.
These “boiler rooms” involved multiple individuals working in a coordinated effort to contact potential investors, often through unsolicited “cold calls,” and providing investors with false, misleading, unfounded, and/or exaggerated information about the relevant issuer in order to induce the potential investors to purchase shares.
The defendants and their co-conspirators profited from the scheme by selling their shares into the market at the artificially high prices they had created through their manipulative activities. By selling their shares while the share price was artificially inflated, the defendants and their co-conspirators were able to realize millions of dollars in illicit profits.
Once the defendants and their co-conspirators had sold off their shares and ceased the stock promotion campaign and their manipulative trading tactics, the share price of the relevant companies typically dropped precipitously.
The defendants and their co-conspirators then laundered the proceeds of the schemes back to themselves in a manner designed to conceal the source of the funds and/or the identity of the recipients. Such laundering was frequently accomplished through the use of fabricated invoices, contracts, and agreements.
“As alleged, for years, the defendants, collectively, made over $100 million by orchestrating ‘pump-and-dump’ stock manipulation schemes of publicly traded shares of U.S.-based issuers,” said US Attorney Damian Williams for the Southern District of New York.
“These pernicious ‘pump-and-dump’ schemes made the defendants rich while causing real harm to ordinary retail investors who were left swallowing the losses. These defendants used a web of nominee entities and shell companies located all over the world attempting to disguise their own orchestration of these schemes. Today’s charges should send a clear message to all of those who think they can make millions running ‘pump-and-dump’ schemes – no matter where in the world you are located, and no matter how many fake accounts and offshore shell companies you try to hide behind, our office will vigorously pursue and prosecute you.”
“Stock manipulation schemes such as the one charged here today serve to undermine confidence in our financial markets and create a playing field designed to illegally benefit a greedy few fraudsters at the expense of many honest investors,” said Assistant Director Michael J. Driscoll for the FBI’s New York Field Office.
“As alleged, the 10 charged defendants operated a global scheme that reaped more than $100 million in illicit proceeds. Our action today should serve as a reminder of our commitment to insure free and fair markets for all investors.”
