LOS ANGELES (CN) - Fourteen people were arrested this week - including a former L.A. County deputy district attorney - and accused of defrauding 20,000 investors of $30 million through stock manipulation scams.
Two grand jury indictments were unsealed Wednesday, laying out "two separate, large-scale fraud schemes," the U.S. Attorney's Office said in a statement.
The U.S. attorney said the conspirators:
"gained control of the majority of the stock of publicly traded companies, often co-opting company management to assist in these efforts;
"concealed their control of the stock by purchasing and transferring shares to offshore accounts and to nominee entities with names such as 'Dojo,' 'Picasso,' and 'Big Dog';
"fraudulently inflated the prices and trading volumes of the companies' stocks through slick marketing campaigns, misleading press releases, payments to stock promoters, and 'cross-trading' among co-conspirators that made it appear the stocks were being actively traded;
"coordinated the sale of the companies' shares at the peak of the fraudulently manipulated market; and
"hid profits in nominee and offshore accounts."
The U.S. attorney called the defendants "serial market manipulators who carried out several fraudulent deals each year, each of which generated several million dollars. The defendants generally targeted marginal companies operating in areas they believed could easily be touted as generating breakthroughs or deals that would explain sudden increases in trading volume and price, including companies purportedly involved in pharmaceuticals, hair restoration, green technologies, entertainment, oil and gas development, and e-commerce websites. The indictments allege that increased trading volume and higher stock prices were actually the result of the defendants' fraudulent actions. A company CEO brought into one of the schemes summed up a typical deal during a wiretapped call: 'There's nothing in there, there's nothing to the company. It's monkey business.'"
According to the indictments, there were five specific deals that defrauded more than 20,000 investors around the world and generated more than $30 million in illegal profits.
Federal officials used wiretaps to investigate the ring.
"One indictment alleges a scheme led by Sherman Mazur and his nephew, Ari Kaplan, charging that they 'perpetrated a multimillion-dollar scheme to fraudulently inflate the prices and trading volumes of public company stocks and then sell millions of shares of those companies at the fraudulently inflated prices to the investing public for substantial profits,'" according to the U.S. attorney's statement.
It continues: "The indictment alleges that the scheme involved a number of companies, but focuses on deals involving two businesses - GenMed, which purported to develop, manufacture and distribute generic pharmaceuticals; and Biostem, which purported to develop and license regenerative stem cell treatments, including hair regrowth technology."
The 32-count Mazur indictment charges nine people, all of whom were arrested Wednesday morning.
They are Sherman Mazur, 63, of Westwood, Los Angeles, who controlled a company called the London Finance Group, Ltd.;
Ari Kaplan, 40, of Venice, Calif., Mazur's nephew and his partner in the London Finance Group and other businesses;
Grover Henry Colin Nix IV, "Colin Nix", 39, of Los Feliz, Los Angeles, who controlled the Santa Monica-based Calbridge Capital LLC, an alleged "boutique investment banking firm";
Regis Possino, 65, of Pacific Palisades, Los Angeles, a disbarred attorney who was Nix's partner at Calbridge Capital;
Edon Moyal, 32, of Carlsbad, who controlled a company called 8 Sounds, Inc. and was free on bond pending trial in a federal criminal case in San Diego;