Remarks as Prepared for Delivery by Special Agent in Charge April Brooks on Nine Individuals Arrested and Indicted in One of the Largest International Penny Stock Frauds and Advance Fee Schemes in History
|FBI New York August 13, 2013|
FBI New York SAC April Brooks prepared the following remarks for a press conference concerning those arrested and indicted in a large-scale penny stock fraud and advance fee scheme.
Today, we announce charges in one of the largest international securities fraud investigations ever conducted by the FBI and the Department of Justice.
The two separate but intertwined schemes claimed victims in nearly 35 countries, involved billions of shares of worthless stocks, and resulted in approximately $140 million in investor losses.
As outlined in the indictment, the participants in the penny stock fraud allegedly inflated and attempted to inflate share prices and trading volumes of penny stocks—the target stocks.
They acquired interest in these target stocks for a nominal cost and promoted them through a variety of means:
- they endorsed false information about the stock companies and their products
- promoted partnerships that never existed
- and offered kickbacks, “matched trades,” or “wash sales” so the trading volumes and share prices of the target stocks would inflate—albeit artificially.
Knowing these stocks had little or no trading volume, they “pumped up” their value and “dumped” them on victim investors worldwide, who believed market influence had caused the share prices to rise and fall.
Adding insult to injury, some of the defendants lulled the victims into a false sense of security with the intent of cheating them once again.
In order to convince victims they could sell shares of target stocks that would typically be difficult to unload, the defendants charged fees for services they never intended to render.
By asking victims to pay advance fees with the promise of realizing larger gains or recovering losses, some of the defendants dipped into the pockets of those they had betrayed not once, but twice.
Posing as 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 so much as a nickel.
This all boiled down to sheer profit for the defendants, because there was, in fact, no legitimate underlying investment.
Fortunately, they weren’t the only ones with a global network.
Working with our partners in the U.S. and around the world, we disrupted this scheme and crippled an operation that sought to exploit our securities markets.
The investing public has the right to trade in an uncorrupted market.
And we have a responsibility to uphold the public’s confidence and prove to the world that the integrity of our financial markets won’t be undermined.
While the charges announced today are significant, they are but one example of what’s left to come as the FBI continues this investigation.
I would like to thank Loretta Lynch and Assistant U.S. Attorneys Christopher Ott, Sylvia Shweder, and Melanie Hendry; the Royal Canadian Mounted Police, Integrated Market Enforcement Team in Vancouver and Toronto; the IRS, Homeland Security, and Treasury Inspectors General; and the Serious Organised Crime Agency in the United Kingdom.
I would also like to acknowledge the commitment and hard work of FBI Case Agent Kurt Dengler and Supervisor David Chaves; the assistance provided by Agent Adam Karczewski, and others from our Los Angeles, Miami, Newark, and Phoenix Field Offices; and our partners in the London, Ottawa and Toronto, Bangkok, and Beijing Legats for their assistance over the years.
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