NEW YORK (Reuters) - Seven people who ran a more than $140 million scheme that preyed on investors in 35 countries by fraudulently inflating the price of penny stocks have been arrested, U.S. prosecutors said on Tuesday.
Two other people, including the alleged mastermind, were charged but remain at large, the prosecutors said.
The scheme led to one of the largest international penny stock investigations ever conducted by the Justice Department and the FBI, the U.S. attorney’s office in Brooklyn said.
The defendants “used our securities markets as a platform from which to run elaborate fraudulent schemes to victimize unsuspecting investors across the globe,” U.S. Attorney Loretta Lynch said in a statement. “Where others saw citizens of the world, the defendants saw a pool of potential marks.”
In addition to the “pump-and-dump” scheme, the defendants operated call centers to induce investors to pay fees for non-existent services to sell their illiquid penny stock shares, in a so-called advance fee scheme, according to the indictment.
The charges against the nine defendants include 24 counts of securities fraud, wire fraud and false personation of Internal Revenue Service employees, according to the statement.
Both schemes were allegedly orchestrated by Sandy Winick, 55, a Canadian who has lived in China, Thailand, Vietnam and the United States, according to an indictment. Winick remains at large and is presumably hiding in Thailand, according to the U.S. attorney’s office in Brooklyn.
Others charged include Joseph Manfredonia, 45, who used phony press releases to promote the penny stocks and recruited others to manipulate their prices and trading volumes, according to the indictment, which was filed earlier this month.
Cort Poyner, 44, bribed brokers to purchase the penny stocks on behalf of their clients, according to the indictment. He was also intercepted on a wire communication reminding others involved in the scheme to use mobile “throwaway phones” to avoid being caught, according to the statement.
Gregory Curry and his son, Kolt Curry, Canadians who also lived at various times in Thailand, managed call centers around the world, including in Canada, Thailand and the UK, and were planning to open a call center in Brooklyn, according to the statement. They also prepared false letters, websites and email accounts to deceive potential and actual victims. Kolt Curry also made phone calls to potential clients.
“Hitting the Americans would be like taking money from a baby,” Kolt Curry, 38, said of the Brooklyn call center in an intercepted wire communication, according to the statement.
Gregory Curry, 63, along with Winick, remains at large.
Gregory Ellis, 46, a Canadian, acted as president of several companies that issued the penny stocks and called potential customers as part of the advance fee scheme, according to the indictment. Ellis was arrested in Ontario, Canada.
Gary Kershner, 72, an American who lived in Arizona and Kansas, made false statements to regulators and investigators and created fraudulent documents, according to the indictment.
Songkram Roy Sahachaisere, 43, an American who lived in California, promoted the penny stocks through Investsource Inc, a public relations firm he owned, according to the indictment.
William Seals, 51, of California, bought and sold several of the penny stocks to manipulate their share price and market volume, according to the indictment.
Lawyers for those accused could not be reached immediately for comment.
Winick has been in trouble with regulators in the past.
In 2010, the U.S. Securities and Exchange Commission won a default judgment against him after he failed to respond to a complaint accusing him of creating dozens of shell companies under a public company he controlled, First Canadian American Holding Corp, later known as Blackout Media Corp.
The SEC accused Winick of creating 59 subsidiaries in Blackout with no legitimate business purpose except to sell unregistered shares in the companies and pocketing the proceeds.
In 2012, he was ordered to disgorge $3.2 million in ill-gotten gains and was permanently barred from the penny stock market, among other penalties, according to court documents.
Blackout is among several companies mentioned in the indictment.
Reporting by Bernard Vaughan; Editing by Jeffrey Benkoe, Dan Grebler and Leslie Adler