Global “Pump-and-Dump” Scheme Targeted Retail Investors and Generated Over $100 Million in Illicit Proceeds
Damian Williams, the United States Attorney for the Southern District of New York, and Michael J. Driscoll, the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced today the unsealing of three indictments charging ten individuals with engaging in a long-running “pump-and-dump” stock manipulation scheme involving the stocks of numerous companies traded on United States-based stock exchanges. The scheme spanned the globe and the ten defendants charged were residents of Canada, the United Kingdom, Bulgaria, Spain, Monaco, Turkey and the Bahamas. RONALD BAUER was arrested in the United Kingdom. CURTIS WILLIAM LEHNER, COURTNEY VASSEUR, and JULIUS CSURGO were arrested in Canada. ANTHONY KORCULANIC was arrested in Spain. PETAR MIHAYLOV was arrested in Bulgaria. Finally, DOMENIC CALABRIGO was arrested in the Bahamas. The United States intends to seek the extradition of BAUER, LEHNER, VASSEUR, CSURGO, KORCULANIC, MIHAYLOV, and CALABRIGO to the United States. CRAIG AURINGER, a citizen of Canada and resident of the United Kingdom, HASAN SARIO, a citizen and resident of Turkey, and DANIEL FERRIS, a citizen of the United Kingdom and resident of Monaco, were also charged and remain at large.
U.S. Attorney Damian Williams said: “As alleged, for years, the defendants, collectively, made over $100 million by orchestrating ‘pump-and-dump’ stock manipulation schemes of publicly traded shares of U.S.-based issuers. These pernicious ‘pump-and-dump’ schemes made the defendants rich while causing real harm to ordinary, retail investors who were left swallowing the losses. These defendants used a web of nominee entities and shell companies located all over the world attempting to disguise their own orchestration of these schemes. Today’s charges should send a clear message to all of those who think they can make millions running ‘pump-and-dump’ schemes --- no matter where in the world you are located, and no matter how many fake accounts and offshore shell companies you try to hide behind, our Office will vigorously pursue and prosecute you.”
FBI Assistant Director Michael J. Driscoll said: “Stock manipulation schemes such as the one charged here today serve to undermine confidence in our financial markets and create a playing field designed to illegally benefit a greedy few fraudsters at the expense of many honest investors. As alleged, the 10 charged defendants operated a global scheme that reaped more than $100 million in illicit proceeds. Our action today should serve as a reminder of our commitment to insure free and fair markets for all investors.”
As alleged in the three Indictments unsealed in Manhattan federal court[1]:
The Defendants
United States v. Ronald Bauer et al., 22 Cr. 155
RONALD BAUER, CRAIG AURINGER, PETAR MIHYALOV, and DANIEL FERRIS participated in a conspiracy that, collectively, involved “pump-and-dump” stock manipulation schemes of the securities of at least 12 United States-based issuers, resulting collectively in at least approximately $75 million in total proceeds.
RONALD BAUER, a/k/a “Patek,” a citizen of Canada and the United Kingdom who resided in the United Kingdom, orchestrated numerous “pump-and-dump” schemes. BAUER controlled the various aspects of the schemes.
CRAIG AURINGER, a citizen of Canada who resided in the United Kingdom, participated in multiple “pump-and-dump” schemes including by coordinating stock promotion campaigns and by providing funding in furtherance of the stock manipulation schemes.
PETAR MIHAYLOV, a/k/a “Petar the Bulgarian,” a/k/a “PDM,” a citizen and resident of Bulgaria, participated in multiple “pump-and-dump” schemes by coordinating stock manipulation promotion campaigns and providing funding in furtherance of the stock manipulation schemes.
DANIEL FERRIS, a citizen of the United Kingdom who resided in Monaco, participated in multiple “pump-and-dump” stock manipulation schemes including by opening accounts that were then used to trade shares and transfer funds in furtherance of the schemes and by taking various actions necessary to prepare the publicly traded companies that were used as the vehicles for the stock manipulation schemes. FERRIS also served as the Chief Executive Officer of at least one of the companies whose shares the group thereafter manipulated.
United States v. Curtis Lehner et al., 21 Cr. 121
CURTIS LEHNER, COURTNEY VASSEUR, HASAN SARIO, and DOMENIC CALABRIGO participated in a conspiracy that, collectively, involved “pump-and-dump” stock manipulation schemes of the securities of at least 9 United States-based issuers, resulting collectively in at least approximately $35 million in total proceeds.
CURTIS LEHNER, a/k/a “Santa,” a citizen and resident of Canada, and COURTNEY VASSEUR, a/k/a “Black Water Resource Management,” a/k/a “Black Water,” a/k/a “Cyrill Vetsch,” a/k/a “Arctic Shark,” a/k/a “Oscar Devries,” a citizen and resident of Canada, both orchestrated numerous “pump-and-dump” schemes.
HASAN SARIO, a/k/a “Ali,” a/k/a “H,” a citizen of Germany and Turkey who resided in Turkey, furthered the stock manipulation schemes by, among other things, acting as a designated “trading specialist” who directed the group’s stock trading across various nominee entity accounts that the group controlled. SARIO also utilized a network of nominee entities and nominee entity bank accounts that he controlled in order to both trade shares and transfer funds in furtherance of the schemes.
DOMENIC CALABRIGO, a/k/a “Raider,” a citizen of Canada who resided in the Bahamas, furthered the stock manipulation schemes by, among other things, coordinating stock promotion campaigns.
United States v. Julius Csurgo and Anthony Korculanic, 22 Cr. 190
JULIUS CSURGO and ANTHONY KORCULANIC participated in a conspiracy that collectively, involved “pump-and-dump” stock manipulation schemes of the securities of at least 19 United States-based issuers, resulting collectively in at least approximately $35 million in total proceeds.
JULIUS CSURGO, a/k/a “Gyula Karoly Csurgo,” a citizen of Canada and Hungary who resided in Canada, orchestrated numerous “pump-and-dump” stock manipulation schemes. In connection with the schemes, CSURGO owned and operated an entity called Antevorta Capital Partners, Ltd. (“Antevorta”), which CSURGO used as a vehicle for the “pump-and-dump” schemes. CSURGO, directly and through Antevorta, furthered the schemes by purchasing and selling numerous stocks in connection with the scheme and funding certain fraudulent stock promotion campaigns that were used to drive up the share prices as CSURGO and his co-conspirators sold off the shares that they controlled.
ANTHONY KORCULANIC, a/k/a “Remy,” a/k/a “Viper,” a citizen of Canada and Croatia who resided, at certain relevant times, in Spain, participated in multiple “pump-and-dump” schemes including by coordinating stock promotion campaigns and by providing funding in furtherance of the stock manipulation schemes.
Overview of the “Pump-and-Dump” Stock Manipulation Schemes
As alleged, the defendants participated in “pump-and-dump” schemes that followed a typical pattern. First, the defendants and their co-conspirators secretly amassed control of the vast majority of the stock of certain publicly traded companies that were traded on the over-the-counter (“OTC”) market in the United States. Second, the defendants and their co-conspirators then manipulated the price and trading volume for these stocks, causing the share price and trading volume to become artificially inflated, through coordinated trading and false and misleading promotional campaigns that they funded. Third, and finally, the defendants sold out of their secretly amassed positions at these inflated values at the expense of the investing public.
In furtherance of the scheme, the defendants used a network of nominee entities to trade shares and funnel proceeds of these schemes back to the defendants and their co-conspirators. Holding the shares through the network of nominee entities allowed the defendants and their co-conspirators to conceal the fact that, in reality, they controlled the vast majority of the shares of the issuer.
The securities that the defendants and their co-conspirators sought to manipulate were issued by small companies, were thinly traded, and typically traded at less than $2 per share. These publicly traded shell companies frequently had few, if any, actual assets or actual business operations. While on paper the defendants and their co-conspirators had no connection to these companies, in reality they exercised substantial control, including installing management at the companies, financing the companies’ operations, and funding payments for attorneys in order to prepare public filings with OTC Markets Group, Inc. and the Securities and Exchange Commission (the “SEC”). In order to attract investor interest, the defendants and their co-conspirators, at times, caused private businesses to be merged or “vended” into the publicly traded shell companies. The private businesses were often in industries likely to attract the investing public’s interest.
In connection with the scheme, the defendants and their co-conspirators frequently engaged in manipulative trading activity in order to artificially increase the trading volume and share price of the stocks. This manipulative trading included, at times, coordinated “match” trades in which the defendants and their co-conspirators caused one nominee entity or other brokerage account subject to their control to sell a certain quantity of shares while causing another nominee entity or brokerage account subject to their control to buy a similar quantity of shares that same day. These match trades, which often occurred on days when there was low trading volume, had the effect of artificially increasing the share price and trading volume of the stock.
As part of the “pump-and-dump” schemes, the defendants and their co-conspirators financed and coordinated promotional campaigns through which promotional materials touting the stocks were distributed to the investing public. These stock promotional materials frequently contained false and misleading claims about the issuer, as well as omitting material information, with the objective of inducing retail investors to purchase the shares of the issuer, which allowed the defendants and their co-conspirators to sell of their substantial positions for a profit. The defendants and their co-conspirators often expended hundreds of thousands of dollars on these stock promotion campaigns. Furthermore, certain of the defendants used a “boiler room” to solicit investors, including investors based in the United States, to purchase shares of certain of the companies. These “boiler rooms” involved multiple individuals working in a coordinated effort to contact potential investors, often through unsolicited “cold calls,” and providing investors with false, misleading, unfounded, and/or exaggerated information about the relevant issuer in order to induce the potential investors to purchase shares.
The defendants and their co-conspirators profited from the scheme by selling their shares into the market at the artificially high prices they had created through their manipulative activities. By selling their shares while the share price was artificially inflated, the defendants and their co-conspirators were able to realize millions of dollars in illicit profits. Once the defendants and their co-conspirators had sold off their shares and ceased the stock promotion campaign and their manipulative trading tactics, the share price of the relevant companies typically dropped precipitously. The defendants and their co-conspirators then laundered the proceeds of the schemes back to themselves in a manner designed to conceal the source of the funds and/or the identity of the recipients. Such laundering was frequently accomplished through the use of fabricated invoices, contracts and agreements.
Each of the defendants is charged with conspiracy to commit securities fraud, which carries a statutory maximum sentence of five years in prison. Each of the defendants is further charged with conspiracy to commit wire fraud, which carries a statutory maximum sentence of 20 years in prison. Each of the defendants is further charged with multiple counts of securities fraud pursuant to Title 15 of the United States Code, which carry a statutory maximum sentence of 20 years in prison per count. Each of the defendants is further charged with wire fraud, which carries a statutory maximum sentence of 20 years in prison. Finally, each of the defendants is charged with conspiracy to commit money laundering, which carries a statutory maximum sentence of 20 years in prison.
The statutory maximum sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by a judge.
Mr. Williams praised the investigative work of the FBI. He further thanked the Justice Department’s Office of International Affairs of the Department’s Criminal Division, as well as authorities in the United Kingdom (in particular the National Extradition Unit), Canada (in particular the Royal Canadian Mounted Police, the Alberta Securities Commission, and the Toronto Police Service Fugitive Squad), Spain (in particular the Spanish National Police), Bulgaria (in particular the National Police Service), and the Bahamas (in particular the Royal Bahamas Police Force). Finally, Mr. Williams also thanked the Securities and Exchange Commission, which initiated civil proceedings against nine of the ten defendants today.
The allegations in the Indictments are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the entirety of the text of the Indictments, and the description of the Indictments set forth herein, constitute only allegations, and every fact described should be treated as an allegation.
