2/15/2013 5:28:00 AM,
LOS ANGELES (CN) - Fourteen people were arrested this week - including a former L.A. County deputy district attorney - and accused of defrauding 20,000 investors of $30 million through stock manipulation scams.
Two grand jury indictments were unsealed Wednesday, laying out "two separate, large-scale fraud schemes," the U.S. Attorney's Office said in a statement.
The U.S. attorney said the conspirators:
"gained control of the majority of the stock of publicly traded companies, often co-opting company management to assist in these efforts;
"concealed their control of the stock by purchasing and transferring shares to offshore accounts and to nominee entities with names such as 'Dojo,' 'Picasso,' and 'Big Dog';
"fraudulently inflated the prices and trading volumes of the companies' stocks through slick marketing campaigns, misleading press releases, payments to stock promoters, and 'cross-trading' among co-conspirators that made it appear the stocks were being actively traded;
"coordinated the sale of the companies' shares at the peak of the fraudulently manipulated market; and
"hid profits in nominee and offshore accounts."
The U.S. attorney called the defendants "serial market manipulators who carried out several fraudulent deals each year, each of which generated several million dollars. The defendants generally targeted marginal companies operating in areas they believed could easily be touted as generating breakthroughs or deals that would explain sudden increases in trading volume and price, including companies purportedly involved in pharmaceuticals, hair restoration, green technologies, entertainment, oil and gas development, and e-commerce websites. The indictments allege that increased trading volume and higher stock prices were actually the result of the defendants' fraudulent actions. A company CEO brought into one of the schemes summed up a typical deal during a wiretapped call: 'There's nothing in there, there's nothing to the company. It's monkey business.'"
According to the indictments, there were five specific deals that defrauded more than 20,000 investors around the world and generated more than $30 million in illegal profits.
Federal officials used wiretaps to investigate the ring.
"One indictment alleges a scheme led by Sherman Mazur and his nephew, Ari Kaplan, charging that they 'perpetrated a multimillion-dollar scheme to fraudulently inflate the prices and trading volumes of public company stocks and then sell millions of shares of those companies at the fraudulently inflated prices to the investing public for substantial profits,'" according to the U.S. attorney's statement.
It continues: "The indictment alleges that the scheme involved a number of companies, but focuses on deals involving two businesses - GenMed, which purported to develop, manufacture and distribute generic pharmaceuticals; and Biostem, which purported to develop and license regenerative stem cell treatments, including hair regrowth technology."
The 32-count Mazur indictment charges nine people, all of whom were arrested Wednesday morning.
They are Sherman Mazur, 63, of Westwood, Los Angeles, who controlled a company called the London Finance Group, Ltd.;
Ari Kaplan, 40, of Venice, Calif., Mazur's nephew and his partner in the London Finance Group and other businesses;
Grover Henry Colin Nix IV, "Colin Nix", 39, of Los Feliz, Los Angeles, who controlled the Santa Monica-based Calbridge Capital LLC, an alleged "boutique investment banking firm";
Regis Possino, 65, of Pacific Palisades, Los Angeles, a disbarred attorney who was Nix's partner at Calbridge Capital;
Edon Moyal, 32, of Carlsbad, who controlled a company called 8 Sounds, Inc. and was free on bond pending trial in a federal criminal case in San Diego;
Mark Harris, 56, of Scottsdale, Ariz., a stock promoter who controlled Apache Capital, LLC, an investor relations firm in Scottsdale;
Joey Davis, 46, of Los Feliz, Los Angeles, who controlled Scripted Consulting Group, a public relations firm in Los Angeles, and who was free on bond pending trial in a federal criminal case in Angeles;
Curtis Platt, who turned 51 Thursday, of Sarasota, Fla., who controlled Big Dog International, LLC; and
Dwight Brunoehler, 62, of Maitland, Fla., the CEO of Biostem, a company based in Clearwater, Fla.
These defendants conspired to commit securities fraud and wire fraud, and made at least $13 million from it, according to the indictment. At least $2.1 million came from manipulating Genmed shares, and $500,000 from "the ongoing manipulation campaign for Biostem," prosecutors said.
Mazur, Nix, Kaplan, Possino and Harris also are charged with money laundering.
The second indictment claims that Regis Possino - a former Los Angeles County deputy district attorney - headed a stock manipulation ring with Nix. Both are charged also in the Mazur indictment.
This 37-count indictment charges 11 defendants, some of them also charged in the Mazur case. In addition to Possino and Nix, the second indictment accuses:
Tarun Mendiratta, 42, of Weston, Conn., who claimed to have earned $75 million to $80 million from market manipulations over the past decade, and who allegedly participated in the current scheme, in part, by using a cell phone smuggled into the prison where he was housed;
Ivano Angelastri, 49, of Switzerland and Dubai, who controlled money and securities in foreign accounts for himself and Mendiratta; Angelastri is the one defendant who was not arrested this week; he is a fugitive;
Mark Harris, the Scottsdale stock promoter;
Edon Moyal; of Carlsbad;
Joseph Scarpello, 52, of Tustin, Calif., a disbarred attorney who controlled Taylor Financial, Ltd.;
Julian Spitari, 47, of Encino, CEO of the company that came to be called FrogAds;
Peter Dunn, 72, of Brentwood, Los Angeles, CEO of Empire Post Media;
William Mackey, 61, a Plantation, Fla. stock promoter, who was free on bond in a federal case from Manhattan;
and Joseph Davis, the Los Angeles PR executive.
They are accused of making at least $18 million from stock manipulation schemes involving Sport Endurance ($1 million), FrogAds ($6.8 million), and Empire Post Media ($1 million.) They too are charged with conspiring to commit securities fraud and wire fraud. Possino, Nix, Mendiratta, Angelastri, Harris, Moyal, Scarpello and Spitari are also charged with money laundering.
Here's how prosecutors described the FrogAds campaign:
"After buying up all of the company's stock just over a year ago, members of the conspiracy arranged for FrogAds to issue a series of press releases touting the company's successes and growth potential, which included making bogus claims that the FrogAds website was among the most visited on the Internet. At the same time, several online stock pickers and at least one analyst recommended FrogAds after being paid by some of the defendants. After the company held a press conference with a well known actress (who was not part of the conspiracy) announcing that she would serve as FrogAds' celebrity spokeswoman, and while members of the conspiracy cross-traded stock to give the false appearance of increased market demand, the price for FrogAds stock went up. But the purported success of FrogAds and the apparent interest in the company's stock were an elaborate fabrication. The indictment quotes one member of the conspiracy saying in a recorded phone call: 'You're dressing this thing up as a multimillion dollar deal, you gotta make sure that we have all our ducks in order.' The manipulation of FrogAds' stock allegedly orchestrated by the conspiracy resulted in profits of nearly $7 million for the defendants."
If convicted of all charges, each defendant faces a statutory minimum of 100 years in federal prison. The investigation by the FBI and IRS intercepted more than 60,000 phone calls and 24,000 test messages.