Stock Fraud: Fyre Festival Founder to Pay $26M After Guilty Plea, Promoter is Accused of Defrauding Gold Mining Stock Investors, and SEC Prevents Alleged Pump-And-Dump Scam
Fyre Festival Founder Pleads Guilty to Wire Fraud and Must Pay Back Investors
Billy McFarland, the founder of the failed Fyre Festival who pleaded guilty to two counts of wire fraud, must may pay back millions of dollars to investors whom he bilked. In Manhattan federal court, McFarland acknowledged that he received more than $26M in investor funds for the Bahamas festival that promised catered dining, luxury accommodations, and renowned performers. Instead, attendees were greeted with no food or tent accommodations.
Billboard reports that eventually prepackaged sandwiches were served, local musicians performed, and the festival was postponed even though it had already begun. Travelers who headed back home encountered rescheduled and delayed flights. Many festival employees went unpaid.
The FBI arrested McFarland last summer. He has since admitted that he solicited investors using bogus documents touting financial holdings that he didn’t possess.
Now, McFarland is facing up to 10 years behind bars. He is also the defendant in numerous lawsuits, including a $100M class action case.
Penny Stock “Mailman” Accused of $1.1M Fraud
The US Securities and Exchange Commission has filed charges against Florida-based penny stock promoter Brian Robert Sodi, accusing him of defrauding investors in gold mining stocks. According to the regulator, Sodi who is referred to as “Mailman” in penny stock arenas because of his intense involvement in direct-mailed penny stock promotions, engaged in scalping.
Scalping in this type of fraud case typically involves the acquisition of stock for one’s benefit before recommending the same stock to others, not disclosing that you already own shares and/or intend to sell them, and selling the shares after the solicitation of said shares have led to an increase in share price.
Sodi is accused of sending out promotions that recommended investors buy stocks in Goff Corporation and Southern USA Resources Inc. while not revealing that he was a share owner in the two companies and he intended to sell his shares using a foreign bank. He also did not disclose that one of the promotions would pay him in stock. When Sodi proceeded to sell hundreds of thousands of his shares, he made over $1.1M in illicit earnings to the “detriment” of investors. Now, he is also facing criminal charges in a parallel criminal case.
Anticipated Alleged Pump-and-Dump Scam is Halted Before It Can Happen
The SEC has barred Manzo Pharmaceuticals (MNZO) President Robert Ritch from ever serving as a director or officer of a public company. Ritch is accused of making false and misleading statements about Manzo to investors in an alleged attempt to raise the demand for the company’s stock.
The alleged misstatements are no longer online, and the SEC said it was able to remedy the alleged situation before any “dramatic spike” in Manzo’s stock price that could have allowed a pump-and-dump fraud to take place.
With a pump-and-dump scam, usually when stock demand and price go up, that is when a fraudster will get rid of his/her shares and stop promoting the stock. This causes the stock’s price to go down and investors to suffer losses.
The SEC’s order said that Ritch had touted the company as a holding company that supposedly acquired and invested in other companies when, in fact, it continued to sustain losses and had an operating history that was “limited.” Also, despite representations that he had made, Ritch did not found, build, and leave any multi-million-dollar businesses, and he never completed over $1B in transactions. He also is accused of hiding his criminal past, including multiple felony convictions for “crimes of dishonesty,” from investors.
Ritch settled the SEC findings without denying or admitting to them. Aside from consenting to the bar and the order to cease and desist, he will pay a $50K penalty. Trading in Manzo has been suspended.
Please contact Shepherd Smith Edwards and Kantas, LTD LLP so that we can help you determine whether you have grounds for a securities fraud case.
The SEC Complaint in the Sodi Case (PDF)
The SEC Release in the Manzo Pharmaceuticals Case (PDF)
Fyre Festival founder Billy McFarland has been ordered to pay $26 million back to investors, NME.com, March 11, 2018
More Blog Posts from SSEK Law Firm:
Voya Holdings Subsidiaries to Repay Mutual Funds Over $2M, Stockbroker Fraud Blog, March 12, 2018
Retirement Accounts : Ameriprise Settles SEC Allegations That It Overcharged for Mutual Funds & Fidelity Undergoes Customer Exodus from Flagship Funds, Stockbroker Fraud Blog, March 5, 2018
As LJM Preservation and Growth Fund Declines in Value and Announces Shut Down, Investors Suffer Losses, Stockbroker Fraud Blog, March 1, 2018