FBI busts seven alleged microcap fraudsters.
"If convicted, the defendants each face up to 20 years in prison, to be followed by three years of supervised release and a $250,000 fine on each count."
"Fraud in the microcap stock market is of increasing concern to regulators as such markets tend to be fertile grounds for fraud and abuse."
Got a tip on microcap fraud? Visit: www.stopfraud.gov
FBI Undercover Operation Nets Seven Defendants in Securities Kicback Scheme
U.S. Attorney’s Office February 27, 2014
BOSTON—Federal charges have been filed in U.S. District Court in Boston against seven individuals alleged to have been involved in a microcap stock kickback scheme.
According to the charges, the schemes involved secret kickbacks to an investment fund representative in exchange for having the investment fund buy stock in certain companies. The kickbacks were to be concealed through the use of sham consulting agreements. What the defendants did not know was that the purported investment fund representative was actually an undercover government agent.
The charges follow a lengthy investigation focusing on preventing fraud in the microcap stock markets. Microcap companies are small publicly traded companies whose stock often trades at pennies per share. Fraud in the microcap stock market is of increasing concern to regulators as such markets tend to be fertile grounds for fraud and abuse. This is, in part, because accurate information about microcap stocks may be difficult for the average investor to find, since many microcap companies do not file financial reports with the U.S. Securities and Exchange Commission.
U.S. Attorney Carmen Ortiz stated, “Secret deals like the ones alleged today harm hard working Americans who invest their savings in the financial markets. Illegal kickbacks undermine fair competition and ultimately destabilize financial markets. For the sake of the investing public, it is critical to protect the integrity of the financial markets and promote fair play by combatting the types of illegal agreements alleged in these cases.”
“Market manipulators should know that our law enforcement team has a proven track record of high-returns in rooting out fund representatives, CEOs, traders, fund managers, equities analysts, lawyers, and publicists who illegally tilt the playing field against honest investors,” said Vincent B. Lisi, Special Agent in Charge of the Federal Bureau Investigation’s Boston Division. “The FBI’s undercover investigation of the illegal manipulation of microcap stocks has resulted in the conviction of 15 people to date and those who believe they can get away with manipulating the markets should be running scared.”
The following individuals have been charged:
Shmuel Shneibalg, 43, formerly of Brooklyn, New York (president and chief operating officer of Safetek International, Inc.), charged with mail fraud and wire fraud
Gerard Haryman, 70, of Lake Worth, Florida (consultant for, and investor in, A Clean Slate Inc.), charged with mail fraud and wire fraud
Ronald Lawrence Schuman, 58, of Palm City, Florida (president and chief executive officer of Connectyx Technologies Corp.), charged with conspiracy to commit wire fraud
Barry Hawk, 45, of Woodmere, New York (president and chief executive officer of Arctic Enterprises Inc. and Strategic Rare Earth Metals Inc.), charged with wire fraud
Hadi Aboukhater, 42, of Haymarket, Virginia (in the business of finding funding for public companies), charged with wire fraud
Sandip Shah, 40, of Chino, California (stock promoter), charged with wire fraud
Shailesh Shah, 47, of Chino, California (President and Chief Executive Officer of SOHM Inc. and Costas, Inc.), charged with mail fraud and wire fraud.
If convicted, the defendants each face up to 20 years in prison, to be followed by three years of supervised release and a $250,000 fine on each count. The initial appearances in U.S. District Court in Boston have not yet been scheduled.
U.S. Attorney Ortiz and FBI Special Agent in Charge Lisi made the announcement today. U.S. Attorney Ortiz expressed appreciation for the significant assistance her office received from the U.S. Securities and Exchange Commission. The criminal cases are being prosecuted by Assistant U.S. Attorneys Sarah E. Walters, Ryan M. DiSantis, and Mark Balthazard of Ortiz’s Economic Crimes Unit, and Trial Attorney Alexander H. Berlin of the U.S. Department of Justice.
This case was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force. President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch and, with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes. For more information about the task force visit: www.stopfraud.gov.
"If convicted, the defendants each face up to 20 years in prison, to be followed by three years of supervised release and a $250,000 fine on each count."
"Fraud in the microcap stock market is of increasing concern to regulators as such markets tend to be fertile grounds for fraud and abuse."
Got a tip on microcap fraud? Visit: www.stopfraud.gov
FBI Undercover Operation Nets Seven Defendants in Securities Kicback Scheme
U.S. Attorney’s Office February 27, 2014
BOSTON—Federal charges have been filed in U.S. District Court in Boston against seven individuals alleged to have been involved in a microcap stock kickback scheme.
According to the charges, the schemes involved secret kickbacks to an investment fund representative in exchange for having the investment fund buy stock in certain companies. The kickbacks were to be concealed through the use of sham consulting agreements. What the defendants did not know was that the purported investment fund representative was actually an undercover government agent.
The charges follow a lengthy investigation focusing on preventing fraud in the microcap stock markets. Microcap companies are small publicly traded companies whose stock often trades at pennies per share. Fraud in the microcap stock market is of increasing concern to regulators as such markets tend to be fertile grounds for fraud and abuse. This is, in part, because accurate information about microcap stocks may be difficult for the average investor to find, since many microcap companies do not file financial reports with the U.S. Securities and Exchange Commission.
U.S. Attorney Carmen Ortiz stated, “Secret deals like the ones alleged today harm hard working Americans who invest their savings in the financial markets. Illegal kickbacks undermine fair competition and ultimately destabilize financial markets. For the sake of the investing public, it is critical to protect the integrity of the financial markets and promote fair play by combatting the types of illegal agreements alleged in these cases.”
“Market manipulators should know that our law enforcement team has a proven track record of high-returns in rooting out fund representatives, CEOs, traders, fund managers, equities analysts, lawyers, and publicists who illegally tilt the playing field against honest investors,” said Vincent B. Lisi, Special Agent in Charge of the Federal Bureau Investigation’s Boston Division. “The FBI’s undercover investigation of the illegal manipulation of microcap stocks has resulted in the conviction of 15 people to date and those who believe they can get away with manipulating the markets should be running scared.”
The following individuals have been charged:
Shmuel Shneibalg, 43, formerly of Brooklyn, New York (president and chief operating officer of Safetek International, Inc.), charged with mail fraud and wire fraud
Gerard Haryman, 70, of Lake Worth, Florida (consultant for, and investor in, A Clean Slate Inc.), charged with mail fraud and wire fraud
Ronald Lawrence Schuman, 58, of Palm City, Florida (president and chief executive officer of Connectyx Technologies Corp.), charged with conspiracy to commit wire fraud
Barry Hawk, 45, of Woodmere, New York (president and chief executive officer of Arctic Enterprises Inc. and Strategic Rare Earth Metals Inc.), charged with wire fraud
Hadi Aboukhater, 42, of Haymarket, Virginia (in the business of finding funding for public companies), charged with wire fraud
Sandip Shah, 40, of Chino, California (stock promoter), charged with wire fraud
Shailesh Shah, 47, of Chino, California (President and Chief Executive Officer of SOHM Inc. and Costas, Inc.), charged with mail fraud and wire fraud.
If convicted, the defendants each face up to 20 years in prison, to be followed by three years of supervised release and a $250,000 fine on each count. The initial appearances in U.S. District Court in Boston have not yet been scheduled.
U.S. Attorney Ortiz and FBI Special Agent in Charge Lisi made the announcement today. U.S. Attorney Ortiz expressed appreciation for the significant assistance her office received from the U.S. Securities and Exchange Commission. The criminal cases are being prosecuted by Assistant U.S. Attorneys Sarah E. Walters, Ryan M. DiSantis, and Mark Balthazard of Ortiz’s Economic Crimes Unit, and Trial Attorney Alexander H. Berlin of the U.S. Department of Justice.
This case was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force. President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch and, with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes. For more information about the task force visit: www.stopfraud.gov.
