Penny Stock Fraud Nets Millions
Stephen D. Anthony, special agent in Charge of the Cleveland Division of the Federal Bureau of Investigation (FBI), for the Northern District of Ohio, and Steven M. Dettelbach, United States attorney for the Northern District of Ohio, announce the federal arrests of Izak Sirk De Maison (aka Izak Zirk Engelbrecht, aka Zirk Engelbrecht), 58 years of age, and Stephen J. Wilshinsky, 59 years of age, in Los Angeles, California, this morning.
De Maison, a self-described “merchant banker,” devised a scheme and artifice to defraud investors by creating public “shell” companies, executing a merger of an emerging business with the shell to create a publicly traded company, and then paying undisclosed kickbacks to brokers, including Wilshinsky, in exchange for using their clients’ funds to purchase shares of the resulting penny stock. The public companies that De Maison created typically conducted minimal actual business activity and had little revenue with no profit. To generate income from the shell companies, De Maison utilized various schemes to sell his company shares to generate personal income. De Maison utilized the same individuals over and over in his schemes.
The complaint alleges that De Maison conspired with brokers, including Wilshinsky, to ensure that any time he wanted to sell free trading shares on the open market, there would be an available buyer. Despite typical low-volume trading in the stocks controlled by De Maison, when he wanted to sell on the open market, orders were filled almost instantaneously. This immediate fulfillment was because De Maison conspired with brokers who had some discretion to make trades in their investor/clients’ accounts. De Maison paid brokers an undisclosed “kickback,” typically 50 percent of the total sale price, in exchange for the brokers using the investor/clients’ accounts the brokers controlled to purchase De Maison’s stocks on the open market. It is unlawful to not disclose the kickbacks to the investor/clients and to not disclose to the investor/clients that their accounts were, in fact, trading in such risky penny stocks.
Another necessary aspect to this scheme for it to succeed was for De Maison, at least for some period of time, to cause the stock price in the companies he controlled to rise before plummeting to a price point that reflected the actual business performance. De Maison conspired with others to inflate the price point through false reporting and manipulative business activities, all of which affected the stock price and helped De Maison achieve the maximum value out of the shares he owned.
De Maison and Wilshinsky are both charged with conspiracy to commit wire fraud and securities fraud. De Maison is also charged with wire fraud, securities fraud, money laundering, and use of interstate commerce for purpose of securities fraud. This matter is considered an on-going investigation. Additional charges are expected against these two individuals and additional individuals are expected to be charged for their roles in this multi-million-dollar conspiracy. A number of victims are from the Northern Ohio area.
“These two are nothing more than sophisticated thieves,” said Anthony. “Putting a suit on and calling it investing does not make stealing acceptable. The FBI will continue to work with the SEC to make sure these two and their additional conspirators answer for this multi-million-dollar fraud.”
”The FBI and SEC continue to work tirelessly to investigate financial fraud,” Dettelbach said. “We will prosecute cases as they are brought to us to ensure faith in the markets and to seek justice for those who have been victimized.” De Maison and Wilshinsky were taken into custody by FBI agents from the Los Angeles office at approximately 7 a.m. PDT/10 a.m. EDT without incident.
A complaint is only a charge and is not evidence of guilt. A defendant is entitled to a fair trial in which it will be the government’s burden to prove guilt beyond a reasonable doubt. If convicted, the defendants’ sentences will be determined by the court after review of factors unique to this case, including the defendants’ prior criminal records, if any; their role in the offenses; and the characteristics of the violations. In all cases, the sentences will not exceed the statutory maximum and, in most cases, it will be less than the maximum.
Any questions regarding this news release can be directed to SA Vicki D Anderson at the Cleveland Office of the FBI, 216-522-1400 or Vicki.Anderson@ic.fbi.gov.