Department of Justice
U.S. Attorney’s Office
Eastern District of New York
FOR IMMEDIATE RELEASE
Wednesday, July 12, 2017
Corporate Insiders And Managers Of Long Island Boiler Room Indicted For Orchestrating $147 Million Stock Manipulation Scheme Involving Publicly Traded Companies
Defendants Made Millions By Artificially Inflating The Companies’ Stock And Inducing Elderly Investors To Purchase That Stock
Overview
As alleged in the indictment and court proceedings, between January 2014 and July 2017, the defendants, together with others, engaged in a $147 million scheme to defraud investors and potential investors in, among other companies, one or more of the following publicly traded companies: NWMH, CESX, GRLD, HECC, and ICEIF (collectively, the “Manipulated Public Companies”), by artificially controlling the price and volume of traded shares in the Manipulated Public Companies through, among other things, (a) artificially generating price movements and trading volume in the shares, and (b) material misrepresentations and omissions in their communications with victim investors about the stock of the Manipulated Public Companies, relating to, among other things, the advisability of purchasing such stock. To execute this scheme, the defendants fraudulently concealed their control of shares of the Manipulated Public Companies that were held in brokerage accounts in the names of other individuals or entities. In addition, in or about and between 2014 and 2017, defendants Chartier, Lee, Isen, Matz, and Hardy engaged in a scheme to launder approximately $14,714,493 in proceeds of the foregoing stock manipulation schemes.
The Stock Manipulation Scheme
In order to carry out the fraudulent pump and dump scheme, employees of the Boiler Room based in Melville, New York, obtained shares from insiders at the Manipulated Public Companies, including the defendants Chartier, Lee and Gleckman, at below-market prices through stock purchase and consulting agreements. Once employees of the Boiler Room obtained shares in the Manipulated Public Companies, the defendants engaged in manipulative trading patterns including wash trades and matched trades to drive up the price of the shares, while aggressively and repeatedly calling and emailing victims – many of whom were senior citizens – to purchase shares in the Manipulated Public Companies. When victims indicated a willingness to purchase a recommended stock, the defendants and their co-conspirators at the Boiler Room called the victims repeatedly, pressured them to follow through with their purchases and directed them to log into their trading accounts while still on the telephone to place purchase orders for the relevant stock. Many of the victims ultimately purchased stock in more than one of the Manipulated Public Companies. In some cases, the Boiler Room also charged the victims for “subscriptions” to receive stock recommendations.
The defendants did not disclose to the victims that, contemporaneously with or shortly after their recommendation to the victims of the stocks of the Manipulated Public Companies, the defendants and their co-conspirators sold their own shares in the same companies. The victims therefore were left with the false and misleading impression that the stocks of the Manipulated Public Companies were sound investments in which the defendants and their co-conspirators themselves firmly believed.
The defendants’ deceptive practices included using false names or the names of co-conspirators instead of their true names during their communications with victims. The defendants Matz, Heepke, Cohen and Jean most frequently employed those tactics by providing false names to victims and by using email addresses in other individuals’ names when communicating with victim investors. In addition, the defendants directed and controlled trading in shares of the Manipulated Public Companies in brokerage accounts with names that were not associated with themselves or the Boiler Room. Such trading, which included matching trades of both victims and co-conspirators as part of the scheme to manipulate the stock of the Manipulated Public Companies, appeared not to be linked to the defendants or the Boiler Room.
The Money Laundering Scheme
Between 2014 and 2017, the defendants Chartier, Lee, Isen, Matz and Hardy engaged in a scheme to launder approximately $14,714,493 in proceeds of the fraudulent schemes to manipulate the share prices of NWMH, CESX, GRLD, HECC and ICEIF. They laundered proceeds of their pump and dump schemes by transferring the proceeds from brokerage accounts that they and their co-conspirators controlled through, among other things, bank accounts in the names of companies controlled by the co-conspirators and other individuals, or by generating invoices to lend the appearance of legitimacy to the transactions.
The government’s case is being handled by the Office’s Business and Securities Fraud Section. Assistant United States Attorneys Alicyn L. Cooley and Patrick T. Hein are in charge of the prosecution.
