SEC charges 13 with fraud in $14 million pump-and-dump scheme
High-pressure and deceitful sales tactics allegedly lost investors, many of whom were elderly, more than $10 million.
The Securities and Exchange Commission brought fraud charges Wednesday against 13 individuals, many of them former brokers, for an alleged pump-and-dump scheme that generated roughly $14 million in illegal gains.
Defendants in two Long Island-based scams allegedly used “boiler-room-style call centers to make hundreds of thousands of cold calls,” relying on high-pressure and deceitful sales tactics to sell penny stocks, which in turn short-changed more than 100 investors out of at least $10 million, according to the SEC.
The U.S. Attorney’s Office for the Eastern District of New York announced it was bringing criminal charges in parallel with the SEC, which is seeking civil penalties and disgorgement of profits with interest, among other things.
(More: Former broker gets 30 months for defrauding investors)
The boiler rooms fraudulently promoted at least four microcap securities, often making “material misstatements” about the investments to investors, who were frequently elderly and unsophisticated, to “pump” up the securities’ price and then sell their own shares at artificially high prices to reap profits, the SEC claims.
In an incident highlighted by the SEC, when one investor complained about incurred losses due to the scheme, one of the defendants allegedly said, “I am tired of hearing from you. Do you have any rope at home? If so tie a knot and hang yourself or get a gun and blow your head off.”
The SEC’s complaint, filed in federal district court in Brooklyn, charges all defendants with fraud and nine with market manipulation. The complaint also names 27 individuals and entities that received proceeds from the fraud, as relief defendants.
(More: Northeast Securities to pay $1.8 million in Finra arbitration claim)
Many of the defendants, including Jeffrey Chartier, Robert Gleckman, Lawrence D. Isen, Stephanie Lee, Michael Watts, Ronald Hardy, Brian Heepke, Erik Matz and Anthony Vassallo, are former registered representatives of broker-dealers.
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