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Press Release

Securities Attorney Arrested In Boston-Based Market Manipulation Scheme

For Immediate Release
U.S. Attorney's Office, District of Massachusetts
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BOSTON – A securities attorney based in California was arrested this morning on securities fraud charges arising out of his participation in a scheme to manipulate the stock of a Boston-based company.

Richard Weed, 52, was charged with conspiracy, securities fraud and wire fraud based on his involvement in the manipulation of the stock of CitySide Tickets, Inc., a Boston-based ticket reseller.

According to the complaint, Weed, along with at least two others, conspired to create the appearance that CitySide was a growing company when, in fact, it was in dire financial straits. Weed, who served as CitySide’s Secretary and as one of two members of CitySide’s Board, was responsible for drafting false and misleading legal opinion letters so that his co-conspirators could obtain free trading stock. Weed also helped his co-conspirators to conceal their control and ownership of CitySide by directing the stock to be distributed to different entities that they controlled. This allowed the conspirators to manipulate CitySide’s stock and sell their shares at artificially high prices. In addition to assisting with the manipulation itself, Weed was also charged with responding to any inquiries from investors or securities regulators.

Two Boston-based stock promoters, Coleman Flaherty and Thomas Brazil, also were charged with conspiracy, securities fraud, and wire fraud arising from their participation in the stock manipulation.

The Securities and Exchange Commission (SEC) filed suit today against Weed, Flaherty and Brazil based on the CitySide market manipulation scheme.

“The prosecution of corporate and securities fraud is a top priority of the Department of Justice and a top priority for this Office,” said United States Attorney Carmen M. Ortiz. “Securities attorneys are the gatekeepers, entrusted with the responsibility of the fair and efficient functioning of our markets. We are committed to working with our regulatory and law enforcement partners to detect and prosecute those engaged in market abuse.”

"Attorney Weed joins more than a dozen CEOs, traders, fund managers, equities analysts, lawyers and publicists caught in the FBI's long-running undercover investigation of the manipulation of micro-cap stocks,” said Vincent B. Lisi, Special Agent in Charge of the Federal Bureau of Investigation, Boston Field Division. “We expect that our ongoing undercover operations to find people like Mr. Weed will continue to return high yields far into the future."

The charges follow a multi-year 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 markets is of increasing concern to regulators as such markets have proven 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 SEC.

The latest charges follow a series of cases filed by the SEC and the U.S. Attorney for the District of Massachusetts in which 27 individuals have been criminally charged, and 20 convicted, for using kickbacks and other schemes to trigger investment in, or manipulate the stock of, thinly-traded stocks.

The statutory maximum penalties for the securities and wire fraud charges are 20 years in prison, and three years of supervised release. The maximum fine for securities fraud is $5 million and the maximum fine for wire fraud is $250,000, or twice the gross loss to the victim. The statutory maximum penalties for the conspiracy charge is five years in prison, three years of supervised release, and a fine of $250,000, or twice the gross loss to the victim. Actual sentences for federal crimes are typically less than the maximum penalties. Sentences are imposed by a federal district court judge based upon the U.S. Sentencing Guidelines and other statutory factors.

U.S. Attorney Ortiz and FBI SAC Lisi made the announcement today. The criminal case is being prosecuted by Assistant U.S. Attorney Sarah E. Walters, Chief of Ortiz’s Economic Crimes Unit and SEC Attorney Eric A. Forni, who was appointed as a Special Assistant U.S. Attorney.

The details contained in the complaint are allegations. The defendant is presumed to be innocent unless and until proven guilty beyond a reasonable doubt in a court of law.

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.

Updated January 8, 2018