U.S. DOJ Files Stock Fraud Charges Against 4 Canadians, 5 Americans Who Bilked $140M from Investors Using Penny Stock Scheme

The U.S. Department of Justice said on Tuesday that it filed stock fraud charges against four Canadians and five Americans who cheated $140 million from thousands of investors from the U.S., Canada and other countries using a penny stock scheme.

Six of the suspects have been arrested resulting from the multi-year investigation jointly conducted by the FBI and the Royal Canadian Mounted Police (RCMP), facilitated by the use of wiretaps in the U.S. and undercover agents overseas.

The pump and dump scheme involves the purchase of controlling interest in dubious startup companies and artificially inflating the value of share prices through the promotion of the stock in fake e-mails, social media messages and press releases.

By using fraudulent sales campaign, the 9 suspects were able to raise $120 million from investors in 35 countries just by operating from phone centres in Canada, Thailand and Britain. Then they further raised another $20 million by convincing the investors to pay advance fees to help their sell their stocks or join in lawsuits to reclaim losses.

"They cheated, lied and swindled investors into buying billions of shares of worthless stock, then turned around and used a second scam to cheat those investors again," Globe and Mail quoted U.S. Attorney Loretta Lynch.

Authorities have arrested two of the Canadian suspects identified as Gregory Ellis, 46, and Kolt Curry, 38. However, Sandy Winick, 55, is still at large in Thailand and Gregory Curry, 63, haven't been located yet. The two Currys are father and son.

The American suspects, namely Gary Kershnner, 72; Joseph Manfredonia, 45; Cort Poyner, 44; Songkram Roy Sahachaisere, 45; and William Seals, 51, have been arrested separately in Arizona, New Jersey, Florida and California.

The nine suspects are facing conspiracy to commit securities fraud, conspiracy to commit wire fraud, wire fraud, securities fraud and false personification of an officer of the United States charges. They face up to 20 years prison term for each charge, if convicted.