NEW YORK (CBSNewYork/AP) – Federal authorities have announced the indictments of nine people they say were involved in an international $140 million penny stock fraud.
As WCBS 880’s Irene Cornell reported, prosecutors said the global scheme involved pumping up the value of penny stocks. The defendants then allegedly dumped their shares and, in the process, fleeced tens of thousands of investors out of $140 million.
The crew of con men then victimized the investors again by setting up a fake law firm that charged them to try to get their money back, federal authorities in New York said Tuesday.
“Posing of employees of fake companies and maintaining call centers in four countries, the defendants recruiting efforts reached victims worldwide. The victims believed they would turn a profit on their nearly worthless penny stocks, but never saw some much as a nickel,” FBI special agent in charge April Brooks said.
The international scheme is one of the largest penny stock fraud schemes in history, U.S. Attorney Loretta Lynch said at a news conference Tuesday.
“The leader of this criminal conspiracy: defendant Sandy Winick. His pool of victims: literally the world. Where others looked at the globe and saw citizens of the world, Winick and his co-conspirators saw only potential marks,” Lynch said.
FBI agents arrested six of the defendants Tuesday in New York, Arizona, New Jersey, Florida and California. A seventh was being held in Canada and two were at large.
Prosecutors argue the defendants lured the investors in with elaborate lies and phony documents designed to reassure them that their investments were safe.
One of the suspects is from Toms River, N.J. Four other suspects are Canadian nationals. Two of them live in Thailand, authorities said.
The indictment alleges that the defendants engaged in a massive “pump and dump” scheme – buying controlling interests in sketchy startup companies, then artificially inflating their value by promoting them in fictitious emails, social media messages and news releases. The fraudulent sales campaign generated more than $120 million in investments by tens of thousands of people in the United States and 34 other countries, including Jamaica, South Africa, Ireland and China, authorities said.
Working out of boiler room phone centers in Canada, Thailand and Britain, the defendants again victimized the same investors by convincing them to pay $20 million in advance fees in return for helping them sell their securities or join lawsuits to reclaim their losses, court papers said. In some instances, the defendants pretended to be Internal Revenue Service employees who told victims they would have to pay a 30 percent tax before they could unload their penny stocks.
The defendants “picked (the investors’) pockets yet again as they promised to help them find a way out of their financial straits,” Lynch said.
The victims were told to wire the advance fees to banks in New York City and elsewhere. The funds eventually made their way to an account in Lebanon, the papers said.
Authorities said the crew had plans to set up a new call center in Brooklyn. In an intercepted phone call, one defendant remarked, “I tell you what, man — hitting the Americans would be like taking candy from a baby,” according to court papers.
Referring to the burned investors, the same defendant was overheard saying, “A lot of these guys are dying to get rid of this crap. — It’s easy money.”
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