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U.S. Attorney release: 14 Arrested For Market Manipulation Schemes that Caused Thousands of Investors to Lose More Than $30 Million

U.S. Attorney release: 14 Arrested For Market Manipulation Schemes that Caused Thousands of Investors to Lose More Than $30 Million

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Federal authorities have arrested 14 people named in two federal indictments that allege long-term schemes to manipulate stock prices that led to more than 20,000 investors losing over $30 million when artificially inflated stock prices collapsed.
Federal authorities have arrested 14 people named in two federal indictments that allege long-term schemes to manipulate stock prices that led to more than 20,000 investors losing over $30 million when artificially inflated stock prices collapsed.

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Published by: scprweb on Feb 14, 2013
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07/10/2013

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NEWSRELEASE
For Immediate Distribution
February 14, 2013
André Birotte Jr.
United States AttorneyCentral District of California
Thom Mrozek, Public Affairs Officer (213) 894-6947
thom.mrozek@usdoj.govwww.justice.gov/usao/cac
14 Arrested For Market Manipulation Schemes that CausedThousands of Investors to Lose More Than $30 Million
Two Federal Indictments Charge 15 Defendants in Plots that Fraudulently Inflated Stock Values and Laundered Profits through Offshore Accounts
LOS ANGELES
 – Federal authorities have arrested 14 people named in twofederal indictments that allege long-term schemes to manipulate stock prices that led tomore than 20,000 investors losing over $30 million when artificially inflated stock pricescollapsed. As one defendant described his scheme during a wiretapped phone call:“What I do is turn stock into money.”The arrests were made yesterday pursuant to two grand jury indictments thatwere unsealed yesterday. The indictments detail two separate, large-scale fraudschemes in which conspirators:gained control of the majority of the stock of publicly traded companies, often co-opting company management to assist in these efforts;concealed their control of the stock by purchasing and transferring shares tooffshore accounts and to nominee entities with names such as “Dojo,” “Picasso,”and “Big Dog”;fraudulently inflated the prices and trading volumes of the companies’ stocksthrough slick marketing campaigns, misleading press releases, payments tostock promoters, and “cross-trading” among co-conspirators that made it appear the stocks were being actively traded;
 
coordinated the sale of the companies’ shares at the peak of the fraudulentlymanipulated market; andhid profits in nominee and offshore accounts. According to court documents, the defendants are serial market manipulatorswho carried out several fraudulent deals each year, each of which generated severalmillion dollars. The defendants generally targeted marginal companies operating inareas they believed could easily be touted as generating breakthroughs or deals thatwould explain sudden increases in trading volume and price, including companiespurportedly involved in pharmaceuticals, hair restoration, green technologies,entertainment, oil and gas development, and e-commerce websites. The indictmentsallege that increased trading volume and higher stock prices were actually the result of the defendants’ fraudulent actions. A company CEO brought into one of the schemessummed up a typical deal during a wiretapped call: “There's nothing in there, there’snothing to the company. It’s monkey business.”The indictments allege that the schemes collectively engaged in five specificdeals that defrauded more than 20,000 investors around the world and generated morethan $30 million in illegal profits.“This case has dismantled a far-reaching stock market manipulation scheme runwith ruthless efficiency and operated with one goal in mind – to steal money from theinvesting public,” said United States Attorney André Birotte Jr. “This type of predatorybehavior cheats the average investor, erodes overall confidence in the markets, andhas a devastating impact on companies and their employees.”One indictment alleges a scheme led by Sherman Mazur and his nephew, AriKaplan, charging that they “perpetrated a multimillion-dollar scheme to fraudulentlyinflate the prices and trading volumes of public company stocks and then sell millions of shares of those companies at the fraudulently inflated prices to the investing public for substantial profits.” The indictment alleges that the scheme involved a number of companies, but focuses on deals involving two businesses – GenMed, which purportedto develop, manufacture and distribute generic pharmaceuticals; and Biostem, whichpurported to develop and license regenerative stem cell treatments, including hair regrowth technology.
 
The 32-count Mazur indictment charges nine defendants, all of whom were takeninto custody yesterday morning. They are:Sherman Mazur, 63, of the Westwood district of Los Angeles, who controlled acompany called the London Finance Group, Ltd.;Ari Kaplan, 40 of Venice, who is Mazur’s nephew and was his partner in theLondon Finance Group, as well as in a series of other business endeavors;Grover Henry Colin Nix IV (who generally used the name “Colin Nix”), 39, of theLos Feliz district of Los Angeles, who controlled the Santa Monica-basedCalbridge Capital, LLC, which purported to be a “boutique investment bankingfirm”;Regis Possino, 65, of the Pacific Palisades district of Los Angeles, a now-disbarred attorney who was Nix’s partner at Calbridge Capital;Edon Moyal, 32, of Carlsbad, California, who controlled a company called 8Sounds, Inc. and while allegedly involved in this scheme was free on bondpending trial in a criminal case filed in federal court in San Diego;Mark Harris, 56, of Scottsdale, Arizona, a stock promoter who controlled ApacheCapital, LLC, an investor relations firm in Scottsdale, Arizona;Joey Davis, 46, of the Los Feliz district of Los Angeles, who controlled ScriptedConsulting Group, a public relations firm in Los Angeles, and who was allegedlyinvolved in this scheme while free on bond pending trial in a criminal case filed infederal court in Los Angeles;Curtis Platt, who turned 51 today, of Sarasota, Florida, who controlled Big DogInternational, LLC; andDwight Brunoehler, 62, of Maitland, Florida, who is the CEO of Biostem, acompany based in Clearwater, Florida.The Mazur indictment alleges that the nine defendants conspired to commitsecurities fraud and wire fraud. The indictment alleges that members of the schemegenerated at least $13 million in illegal proceeds when they sold their shares of manipulated companies, a figure that includes at least $2.1 million in illegal proceedsfrom the manipulation campaign for Genmed, as well as $500,000 in illegal proceedsfrom the ongoing manipulation campaign for Biostem. The indictment further alleges

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