Joon H. Kim, the Acting United States Attorney for the Southern District of New York, announced that GEORGE DOUMANIS and EMANUEL PANTELAKIS, a/k/a “Manny,” each pled guilty today to defrauding investors in Terminus Energy, Inc., a publicly traded penny stock. DOUMANIS and PANTELAKIS each pled guilty to conspiracy to commit securities fraud before U.S. Magistrate Judge Debra Freeman. They will be sentenced before U.S. District Judge Andrew L. Carter on April 9, 2018.
Acting U.S. Attorney Joon H. Kim said: “Today, George Doumanis and Emanuel Pantelakis both admitted to operating an investment scheme by luring investors in a supposed fuel cell technology which they knew to be fictitious. In furtherance of their scheme, the two used misleading documents to dupe investors into contributing over $7 million into their phony penny stock – which they eventually used to pay their own personal expenses. This Office and our law enforcement partners will continue to keep a watchful eye on the investment markets and prosecute those who mislead the investing public.”
According to the allegations contained in the Indictment filed against DOUMANIS, PANTELAKIS and their co-conspirator, and statements made in related court filings and proceedings[1]:
From at least February 2008 until at least 2014, DOUMANIS and PANTELAKIS, along with their co-conspirator Danny Pratte, engaged in a scheme to defraud investors in the publicly traded company Terminus Energy, Inc. (“Terminus”), by inducing victims to invest in Terminus stock through material misrepresentations and omissions and by misappropriating investor funds for their own purposes.
Terminus was purportedly producing and marketing a commercially viable “fuel cell” as an alternative energy source. DOUMANIS, PANTELAKIS, and Pratte sold shares of Terminus to investors through private offerings. In connection with such sales, DOUMANIS, PANTELAKIS, and Pratte provided investors with private placement memorandums (“PPMs”) that contained materially false and misleading statements. For example, the PPMs falsely stated that (i) Terminus had completed its goal of developing a working fuel cell in mid-2008; (ii) Terminus would use specified investors’ funds to make payment on third-party development contracts designed to manufacture a working fuel cell; and (iii) Terminus would pay no more than 10 percent in sales commissions. In truth, and as DOUMANIS, PANTELAKIS, and Pratte well knew, (i) there was no working fuel cell; (ii) the third party contracts had been cancelled after Terminus failed to make payment to the third parties; and (iii) unregistered salesmen were receiving commissions far in excess of 10 percent. The PPMs also failed to accurately disclose the involvement of either DOUMANIS, who was barred from involvement in penny stocks as a result of a 2003 conviction for conspiracy to commit securities fraud, wire fraud, and mail fraud, or PANTELAKIS, who had been permanently barred by the Financial Industry Regulatory Authority (“FINRA”) following allegations that he had made fraudulent misrepresentations to customers in connection with the sale of securities. DOUMANIS, PANTELAKIS, and Pratte also caused similar misrepresentations to be made in business plans, executive summaries, and presentations shared with potential investors, as well as in publicly available press releases. Through these false and misleading statements, DOUMANIS, PANTELAKIS, and Pratte fraudulently induced investors to purchase nearly $8 million of Terminus stock.
Rather than use the investor money as promised, DOUMANIS, PANTELAKIS, and Pratte misappropriated the funds for their own use and for use by their co-conspirators. For example, DOUMANIS, entities affiliated with DOUMANIS, and certain of his family members received at least $570,000, including payments to personal credit cards and toward DOUMANIS’s residential mortgage. PANTELAKIS and certain of his family members received at least $420,000, including payments to personal credit cards and to pay for PANTELAKIS’s wife’s Mercedes-Benz. Pratte personally received approximately $1 million. In addition, the unregistered salespeople collectively received undisclosed commissions of more than $1.5 million.
GEORGE DOUMANIS, 59, and EMANUEL PANTELAKIS, a/k/a “Manny,” 42, each pled guilty to one count of conspiracy to commit securities fraud, which carries a maximum sentence of five years in prison and a maximum fine of $250,000 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 defendants will be determined by the Court.
Trial against defendant Danny Pratte is scheduled to commence on May 1, 2018, on charges of conspiracy to commit securities fraud, securities fraud, conspiracy to commit wire and mail fraud, and wire fraud. The allegations contained in the Indictment as to Pratte are merely accusations, and he is presumed innocent unless and until proven guilty.
Mr. Kim praised the work of the Federal Bureau of Investigation, and thanked the SEC.
[1] As for the defendant who has not pled guilty, Danny Pratte, the description of the charges set forth herein constitute only allegations.
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