Eight People Implicated in $39M Penny Stock Fraud Get Prison Sentences, Must Pay Restitution
In Ohio, eight people were sentenced to prison terms ranging from almost two years to a dozen years for their involvement in a penny stock scam that caused investors to suffer $39M in losses. One of the defendants, Zirk de Maison, received the 12-year sentence. He was ordered to pay $39.1M in restitution. The other defendants also were ordered to pay restitution in lower amounts.
According to prosecutors, the defendants conspired to bilk investors and potential ones in a number of public issuers. They did this by putting out millions of shares and artificially controlling the price and volume of the shares that were traded. This was accomplished through undisclosed commissions paid to brokers, boiler room operators, and promoters who got investors to invest, as well as through the fraudulent concealment of ownership interests in the companies in which the funds were invested.
In some instances, brokers and ex-brokers were paid illegal kickbacks of sometimes up to 50%. Clients were not told of these payments. The co-conspirators used most of investors’ money to enrich themselves. Some of the defendants were boiler room owners.
SIPC Alerts Investor of Scam Using Its Name
The Securities Investor Protection Corporation is warning the public about a scam in which the fraudsters are using the nonprofit corporation’s name. The SIPC was created by Congress to protect clients in the event that a member broker-dealer declares bankruptcy.
According to a news report, there is a business or an individual out there that is fraudulently claiming to have been commissioned by the SEC to help an investor who was bilked in recovering his funds. The investor was purportedly told that he would have to pay the fraudster a percentage of the funds that were lost in order to get his money back. SIPC maintains that these representations are false.
Customers assisted by SIPC are never asked to pay anything for help in the recovery process. SIPC noted that when liquidation of a broker-dealer covered under the Securities Investor Protection Act takes place, outside businesses or individuals are never commissioned to help recover investors’ funds.
Investors File Securities Fraud Lawsuit After Finding Out About Banc of California’s Alleged Connection to Fraudster
Investors have filed a class action securities case after learning that Banc of California (BANC) may have ties to alleged financial scammer Jason Galanis. The plaintiffs are investors who would have bought the bank’s securities between 10/29/15 and 1/20/17. They are alleging violations of the Securities Exchange Act.
According to Courthouse News Service, it was an article in Seeking Alpha that revealed Banc of California’s purported connection to Galanis, who has also been accused of committing fraud with his father and others. This includes the alleged bilking of investors of millions of dollars of bogus Native American Tribal bonds. Last year, Galanis pleaded guilty to manipulating the market for Gerova Financial Group, Ltd. (GVFG) and bilking that company’s shareholders.
The Seeking Alpha article reports that not only did Galanis control the bank’s founding shareholder, COR Capital, but also, an off-balance sheet lender that is controlled by the highest level officers at the bank had financed Galanis, and the bank’s lead “independent director purportedly has strong ties with him. Last month, the US Securities and Exchange Commission announced that it had opened a probe into whether Banc of California had misled investors.
Beware Of Scam Involving The Misuse Of SIPC’S Name, SIPC, February 1, 2017
Investors Sue After Banc of California’s Alleged Ties to Fraudster Revealed, Courthouse News Service, January 30, 2017
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