Articles Tagged with Scam

Gerova Financial Group Chairman and Two Others Plead Guilty in Scam to Defraud Native American Tribe and Other Investors

Gary Hirst, Jason Galanis, and Hugh Dunkerley have all pleaded guilty to criminal charges related to a scam to defraud a Native American tribal entity and a number of investment advisory clients. Prosecutors contend that the three men took part in a scam to misappropriate bond proceeds from securities issued by the Wakpamni Lake Community Corporation and to use money in asset management firm clients’ accounts to buy the bonds. The clients were then not able to buy or sell the bonds, because the securities were not liquid and did not have a ready secondary market.

Hirst, who pleaded guilty to four fraud counts, now faces up to 35 years in prison and $2.75M in fines. The former chairman of Gerova Financial Group Ltd was sentenced to 6.5 years in prison last year for defrauding shareholders when he secretly awarded himself and others almost $72M of the reinsurer’s stock. Hirst also had to forfeit approximately $19M.

In its first customer protection advisory regarding pump-and-dump scams involving virtual currencies, tokens, or digital coins, the US Commodity Futures Trading Commission cautioned that even seasoned investors could be targeted. The regulator recommended that customers do a good job of researching prospective investments, learn the signs of possible investment fraud, and stay away from investments that “they don’t fully understand.”

Pump-and-dump scams typically involve raising the demand for a stock, and as a result, its share price, before dumping whatever shares are left so that the stock price drops. Remaining investors are left with practically worthless stock while the fraudsters usually have made a profit from dumping (selling) their shares when the stock price was still high. The CFTC is cautioning that this same fraud is now being used with virtual currencies.

Online message boards, mobile messaging applications, and other new technologies are now taking the place of boiler rooms to handle the solicitation of money from prospective investors, with some chat rooms holding thousands of members. It is also that fake news about these virtual investments is being published.

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