Four Plead Guilty to E-mail, Securities Fraud in 'Pump-and-Dump' Scheme
E-mail blasts designed to boost stock price, activities to create illusion of trading volume, cost investors more than $20 million, government says.
IDG News Service (Washington, D.C., Bureau) — Three U.S. men and one man living in France have pleaded guilty to charges related to a stock manipulation scheme that included sending out tens of millions of spam messages to pump up the stock value of 15 companies, the U.S. Department of Justice said.
The four men cost investors more than $20 million in their so-called pump-and-dump scheme, the DOJ said Sept. 6.
Michael Saquella, also known as Michael Paloma, 47, of Mesa, Ariz., pleaded guilty in U.S. District Court for the Eastern District of Virginia in Alexandria on Aug. 20. Lawrence J. Kaplan, 63, of Scottsdale, Arizona, pleaded guilty on July 25, in Alexandria to similar charges. Henry "Hank" J. Zemla, 38, of Harris Township, Michigan, also pleaded guilty in federal court in Alexandria on July 20.
The three defendants are scheduled to be sentenced between late November and early February.
Saquella pleaded guilty to a criminal information charging him with one count of conspiracy to commit securities fraud and one count of electronic mail fraud involving 15 publicly traded companies. Kaplan pleaded guilty to a criminal information charging him with one count of conspiracy to commit securities fraud involving 14 of these companies, and Zemla pleaded guilty to a criminal information charging him with one count of conspiracy to commit securities fraud involving one of the companies. The plea agreements for all three defendants were unsealed Thursday.
The scheme involved stocks from companies including eDollars Inc., Xtreme Technologies Inc, and PokerBook Gaming Corp.
Justin Medlin, 26, of Paris, also pleaded guilty in federal court in Alexandria on Aug. 20 to a criminal information charging him with one count of electronic mail fraud and one count of conspiracy to commit securities fraud and electronic mail fraud involving seven of the companies. Medlin's plea agreement was unsealed Thursday. He will be sentenced on Nov. 30.
The maximum penalties for each of the fraud charges is five years in prison and a $250,000 fine.
The stock manipulation schemes generally followed a similar pattern, the DOJ said. The defendants generally solicited small, privately held companies that needed to raise money. One of the defendants would offer to help the company raise significant money through the sale of the company's stock, and then the defendants would list the company's shares on the Pink Sheets, a price quotation system primarily used for trading small companies' stocks.
The group of defendants would then gain control of a majority of the stock of the company, the DOJ said.
