Canadians charged in US$100-million scam

Several Canadians have been charged by U.S. authorities in connection with an alleged US$100-million global pump-and-dump scheme.

The U.S. attorney’s office for the Southern District of New York announced charges against 10 people, including several Canadians, who allegedly operated a long-running series of market manipulation schemes targeting retail investors, involving numerous companies traded on the U.S. over-the-counter (OTC) market.

The alleged schemes involved co-conspirators secretly gaining control of a company’s stocks and artificially inflating them through coordinated trading and hype campaigns before finally dumping the overpriced stocks on unsuspecting investors.

Collectively, these schemes generated over US$100 million in illicit trading profits, U.S. authorities alleged as they unsealed three separate indictments charging the 10 individuals.

“The scheme spanned the globe and the 10 defendants charged were residents of Canada, the United Kingdom, Bulgaria, Spain, Monaco, Turkey and the Bahamas,” the U.S. Department of Justice (DoJ) said in a release.

Several of the accused have been arrested in Canada, authorities said, while other Canadian citizens were also apprehended in Spain, the Bahamas and the U.K. Three of the accused, including one Canadian, remain at large.

The DoJ said the defendants used a network of shell companies and nominees to trade shares and funnel the proceeds of their schemes back to them, while hiding their involvement from investors.

“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 U.S. Securities and Exchange Commission (SEC),” the DoJ said.

All the defendants have been charged with securities fraud, wire fraud, and conspiracy to commit securities fraud, wire fraud and money laundering.

“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,” said FBI assistant director, Michael Driscoll, in a release.

“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 ensure free and fair markets for all investors,” he said.

James Langton

James is a senior reporter for Advisor.ca and its sister publication, Investment Executive. He has been reporting on regulation, securities law, industry news and more since 1994.