LAS VEGAS (CN) - A disbarred Texas attorney helped set up "a classic pump-and-dump scheme" in a penny stock called Rudy Nutrition, named for a walk-on football player at Notre Dame, the SEC claims in court.
The SEC sued Joseph A. Saranello on Thursday in Federal Court.
Saranello, of Silverthorne, Colo., "is a disbarred Texas lawyer who arranged for a series of Panamanian corporations that he and others used in this scheme to obtain and sell RUNU stock," the SEC says in the lawsuit.
Daniel "Rudy" Ruettinger was the subject of the 1993 movie "Rudy." He founded Rudy Nutrition (RUNU) to compete with Gatorade, the SEC says. Although RUNU did produce "modest quantities" of the sports drink, "it primarily served as a vehicle for a pump-and-dump scheme that occurred between February and September 2008 and grossed over $11 million for the participants," according to the SEC complaint.
The SEC says Saranello "set up phony Panamanian companies and opened brokerage accounts that he and others used in the scheme." It claims he did so at the direction of Chad Smanjak, who wanted to conceal his involvement. Smanjak and Saranello arranged for the Panamanian companies to get large blocks of "purportedly unrestricted RUNU stock" and then pumped and dumped it "through fraudulent touting and manipulative trading," the SEC says.
The SEC said it sued Ruettinger and at least eight associates, all of whom agreed to final judgments against them in January 2012. It also sued Smanjak, won nonmonetary relief, and a proposed final judgment is pending, according to the SEC.
It seeks disgorgement, penalties and an injunction.
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