Recidivist Securities Fraud Defendant Extradited and Charged in Manhattan Federal Court in Connection with Market Manipulation and Scheme to Defraud
Preet Bharara, the United States Attorney for the Southern District of New York, Diego Rodriguez, the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), and Philip R. Bartlett, Inspector-in-Charge of the New York Office of the U.S. Postal Inspection Service (“USPIS”), announced the unsealing of an Indictment against EDWARD DURANTE, a/k/a “Ted Wise,” a/k/a “Efran Eisenberg,” a/k/a “Yulia,” a/k/a “Ed Simmons,” charging him with conspiracy, securities fraud, wire fraud, money laundering, and perjury stemming from a scheme, between 2009 and March 2015, to defraud at least 100 investors of more than $14 million, more than $9 million of which was funneled to DURANTE, his family, or co-conspirators. DURANTE executed the scheme – which centered around a publicly-traded Over-The-Counter company called VGTel, Inc. (“VGTL”) – through false and misleading representations about how private investor monies would be used, making material omissions in connection with the sale of VGTL securities, and through manipulation of the public market in VGTL’s stock. DURANTE, who was previously convicted of similar charges in this District in 2001 and was released from prison in 2009, arrived in the United States yesterday following his extradition from Germany. DURANTE was presented today in federal court in Manhattan before United States Magistrate Judge Henry B. Pitman. The case is assigned to U.S. District Judge Andrew L. Carter, Jr.
In a separate action, the U.S. Securities and Exchange Commission (“SEC”) announced civil charges against DURANTE.
U.S. Attorney Preet Bharara said: “As alleged, Edward Durante no sooner got out of prison from a prior securities fraud conviction than he started another fraud scheme. Picking up where he left off, Durante allegedly lied to investors about how their money would be used, and concealed his manipulation of the market for a publicly traded stock. Edward Durante now stands charged with securities fraud yet again.”
FBI Assistant Director-in-Charge Diego Rodriguez said: “Durante tricked his victims into thinking their money would be invested as promised. Instead, he allegedly used their investments to fund his own lavish lifestyle. Unlike Durante, the FBI and our partners intend to keep the promises we make to those who invest their faith in us. Those who employ schemes to capitalize on the pain and suffering of others will most certainly be brought to justice.”
USPIS Inspector-in-Charge Philip R. Bartlett said: “Through lies and manipulation, Durante and his co-conspirators devised an egregious scheme with the sole purpose of stealing from investors; a classic case of greed overcoming honest business practices. Postal Inspectors remind investors that whenever great returns are offered, an abundance of caution should be exercised to avoid becoming a victim of a scam.”
According to the allegations in the Indictment unsealed today in Manhattan federal court,1 and statements made in court proceedings:
2001 Securities Fraud Conviction
In December 2001, DURANTE was convicted in federal court of conspiracy to commit securities fraud, wire fraud, and money laundering, as well as making false statements in connection with a market manipulation scheme in which the defendant also used the alias “Ed Simmons.” The defendant was sentenced to 121 months in prison and was released in or about 2009, the year he began the current scheme. In connection with that scheme, DURANTE was ordered by a United States District Court to pay disgorgement and prejudgment interest totaling over $39 million. DURANTE was also barred from certain activities in connection with the securities industry, including the sale of securities.
Private Placement Securities Fraud Involving VGTL
Among other fraudulent and illicit conduct, between 2009 and in or about March 2015, DURANTE and his co-conspirators fraudulently induced victims to invest in VGTL by, among other things, lying to investors by representing that their investments would be used to fund the operations and growth of VGTL, when in reality their investments were used to personally benefit DURANTE and his co-conspirators. DURANTE also fraudulently induced private investments in VGTL by (a) lying to certain prospective investors about DURANTE’s true identity; (b) failing to disclose to prospective investors that DURANTE had previously been convicted of federal securities fraud violations; and (c) failing to inform certain prospective investors, when they were solicited by brokers to purchase VGTL, that they were purchasing VGTL shares from entities controlled by DURANTE and his associates, rather than from the issuer, and for which entities the brokers were acting as agents. Throughout this time, DURANTE used multiple aliases in connection with his oral and written communications with investors, including “Ted Wise,” “Efran Eisenberg,” and “Yulia.”
In order to fund his illegal scheme, DURANTE used a network of brokers and/or investment advisers (the “brokers”) across the country to recruit investors to buy shares of VGTL, including from California, the Midwest, New York, and Boston. The brokers used different tactics to entice investors. While certain investors knew they were investing in VGTL, the broker typically did not disclose that DURANTE had previously been convicted of securities fraud and other crimes and also misled investors about conflicts of interest and self-dealing that arose when brokers, who were paid by or associated with entities controlled by DURANTE and his associates, solicited investors to purchase VGTL shares without disclosing that the investors were actually purchasing shares directly from these DURANTE-controlled entities. In still other cases, the broker purchased VGTL stock without the permission of the victim investors.
Manipulation of the Market for Shares of VGTL
Aware that increased trading volume in publicly traded VGTL stock would make it more attractive to buyers and investors of private shares of VGTL, DURANTE’s scheme also included an effort to artificially inflate the price of publicly traded VGTL shares in order to create the appearance of greater demand for VGTL shares than actually existed. To pump up VGTL’s stock price, DURANTE caused others to engage in transactions in which accounts under DURANTE’s control bought or sold VGTL stock, while on the same day other accounts under DURANTE’s control took the opposite position. The result of these transactions was that DURANTE and his co-conspirators were effectively taking both sides of a single transaction in VGTL stock in order to artificially inflate the trading volume in VGTL stock as well as its price. In turn, the inflated price fueled DURANTE’s ability to raise private funds for VGTL. In total, Durante pocketed more than $9 million from investor funds, which he caused to be funneled to himself, his family, and his co-conspirators.
DURANTE, 63, is charged with one count of conspiracy to commit securities fraud, one count of securities fraud, one count of conspiracy to commit wire fraud, one count of wire fraud, one count of conspiracy to commit money laundering, one count of money laundering and one count of perjury. Counts One and Seven each carry a maximum sentence of five years in prison. Counts Two through Six each carry a maximum sentence of 20 years in prison. The charges also carry a maximum fine of $5 million, or twice the gross gain or loss from the offense. The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.
Mr. Bharara praised the work of the FBI and the Postal Inspection Service, and thanked the Securities and Exchange Commission for its assistance. He also thanked the United States Marshals Service for their efforts in achieving DURANTE’s extradition. He added that the investigation is continuing.
The charges were brought in connection with the President’s Financial Fraud Enforcement Task Force. The task force was established to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. attorneys’ offices, and state and local partners, it is the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets; and conducting outreach to the public, victims, financial institutions and other organizations. Since fiscal year 2009, the Justice Department has filed over 18,000 financial fraud cases against more than 25,000 defendants. For more information on the task force, please visit www.StopFraud.gov.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Edward Y. Kim, Daniel S. Goldman, and Andrea M. Griswold are in charge of the prosecution.
The allegations contained in the Indictment are merely accusations, and the defendant is presumed innocent unless and until proven guilty.
As the introductory phrase signifies, the entirety of the text of the Indictment and the description of the Indictment set forth herein constitute only allegations, and every fact described should be treated as an allegation.