DALLAS (CN) - Federal prosecutors charged a Texas stock promoter Friday with securities fraud involving the Austin-based private jet-booking system operator ConnectAJet.com.
Ryan Mark Reynolds faces one felony charge of conspiracy to commit securities fraud, according to the criminal information in Dallas.
Prosecutors say Reynolds and others conspired to manipulate and artificially inflate the demand and price of ConnectAJet.com shares. They then allegedly sold their shares at inflated prices to public investors.
Reynolds and the co-conspirators entered into subscription agreements with the company to buy shares for a penny each, according to the information.
"Certain coconspirators in Texas, with the defendant's knowledge and agreement, arranged for an attorney in Arizona to issue a legal opinion that the company could issue shares covered by the subscription agreements 'without a restrictive legend,' and that the shares could be 'sold in a public market by the holder therof without registration,'" the government says.
A pair of co-conspirators engaged in a campaign of false and misleading publicity about the company from August to September of 2007, while Reynolds and another co-conspirator sold millions of shares at $1 to $3 per share, according to the filing.
"Using mailings, faxes, print media, and television, the co-conspirators unleashed a barrage of press releases and advertising that misrepresented and omitted material facts, thereby mischaracterizing and exaggerating the operational capabilities, business prospects and initial success of ConnectAJet.com Inc.," the information states. "The publicity campaign contributed to an increase in demand for CAJT shares, and an increase in share price."
In 2009, the Securities and Exchange Commission sued ConnectAJet and several of its officers, promoters and related entities for selling 30 million shares. The complaint called the booking system a sham and a "figment of the imagination."
CEO Martin T. Cantu, 52, of Round Rock and stock promoter Timothy Page, 38, of Malibu, Calif., were also named in the complaint. They and Page-owned entities Testre LP and Verona Funds LLC allegedly sold the 30 million unregistered shares after ConnectAJet and Cantu had "pumped up demand for CAJ stock by launching a national marketing campaign."
The SEC sought disgorgement and damages from Cantu; Cantu's father, Martin M. Cantu, of San Antonio, "sole member and director of defendant Firenze Funds"; Firenze Funds; Page, who also operates Griffdom Enterprises; and Lion Capital Holdings, "a public company with no apparent operations," the SEC said.