Three stock promoters have been indicted for their roles in a stock manipulation scheme that defrauded investors. Timothy Barham Jr., 43, of Henderson, Tenn.; Nathan Montgomery, 30, of Henderson, Nev.; and Ryan Reynolds, 39, of Dallas, were each charged in a superseding indictment filed on April 28, 2011, in U.S. District Court for the Southern District of Florida. The superseding indictment charges Barham, Montgomery and Reynolds each with one count of conspiracy to commit securities fraud, wire fraud and mail fraud. The superseding indictment also charges six individuals who were originally indicted in February 2010 for their roles in the fraud scheme: Jonathan Randall Curshen, 46, of Sarasota, Fla.; Michael Simon Krome, 49, Long Island, N.Y.; Ronald Salazar Morales, aka “Ronny Salazar,” 39, of Costa Rica; Robert Lloyd Weidenbaum, 44, of Miami; and Eric Ariav Weinbaum, 37, and Izhack Zigdon, 47, both of Israel.
The defendants are all charged with one count of conspiracy to commit securities, mail and wire fraud. Additionally, as in the original indictment, the superseding indictment charges Krome, the attorney, with one count of securities registration violation, one count of obstruction of justice and one count of wire fraud. Weinbaum and Zigdon also continue to be charged with three counts of wire fraud. In addition, Curshen and Salazar each are charged with two counts of mail fraud, and Weidenbaum and Weinbaum each are charged with one count of mail fraud. The superseding indictment also charges Curshen and Salazar with one count of conspiracy to commit money laundering. The superseding indictment seeks forfeiture in the amount of $7 million.
Weinbaum and Zigdon took control of a company called CO2 Tech, which traded in the OTC market. Weinbaum and Zigdon obtained the shares by retaining Krome, a securities attorney. Krome allegedly evaded federal securities regulation requirements in order to provide co-conspirators with millions of unregistered shares of CO2 Tech that could not have otherwise been legally obtained.
In the indictment, the defendants fraudulently pumped up the market price and demand for CO2 Tech’s stock by making coordinated trades between themselves and making it appear that there were genuine investors in the market that were buying the shares. The defendants are also alleged to have made false and misleading press releases about CO2 Tech’s business relationships. After all the coordinated trades and false press releases artifically pumped the price of CO2 Tech, the defendants “dumped” their shares by selling them for huge profits at the expense of the general investing public.
Each count of wire fraud and mail fraud carries a maximum penalty of 20 years in prison and a $250,000 fine. The fraud conspiracy charges carry identical penalties as the substantive fraud offenses, up to 20 years imprisonment. The securities registration violation carries a maximum penalty of five years in prison and a $10,000 fine and the obstruction count carries a maximum penalty of 20 years in prison and a $250,000 fine. The money laundering conspiracy charge carries a maximum penalty of 20 years in prison. Each participant is facing decades of prison time for their participation in this scheme.
The author of this blog is Erich Ferrari, an attorney specializing in Federal Criminal Defense matters. If you have any questions please contact him at 202-280-6370 or firstname.lastname@example.org.