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Saturday, May 18, 2024 | Back issues
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Toronto Pump & Dumper Can’t Pry Out U.S. Nails

(CN) - A Canadian who manipulated the prices of four U.S. stocks from his foreign accounts is liable for securities fraud under U.S. law, the 3rd Circuit ruled.

Toronto-based George Georgiou had turned to the federal appeals court in Philadelphia after the ex-stockbroker was sentenced there to 25 years in prison for securities fraud. In addition to owing more than $55 million in restitution, Georgiou faced forfeiture of $26 million.

Georgiou's scheme involved manipulating the stocks of four U.S. companies - Neutron Enterprises, Avicena Group, Hydrogen Hybrid Technologies, and Northern Ethanol - from brokerage accounts he opened in Canada, the Bahamas, and Turks and Caicos.

By trading stocks between these various accounts, he and his co-conspirators inflated the stock prices and created the false impression there was an active market for these shares.

He was then able to use these inflated shares as collateral for million-dollar loans from brokerage firms based in the Bahamas, forcing one to liquidate when the underlying shares proved worthless.

The 3rd Circuit on Jan. 20 rejected Georgiou's claims that his convictions were improperly based on the extraterritorial application of U.S. law.

Indeed prosecutors showed that U.S. middlemen facilitated at least one trade in each stock, and that Georgiou directed a U.S. co-conspirator on several occasions to make a manipulative trade.

Georgiou's actions incurred "irrevocable liability in the United States," the ruling states.

"We now hold that irrevocable liability establishes the location of a securities transaction," Judge Joseph Greenaway wrote for a three-judge panel. "Here, the evidence is sufficient to demonstrate that Georgiou engaged in 'domestic transactions', i.e., transactions involving 'the purchase or sale of any [] security in the United States.'"

Georgiou also failed to support claims of evidentiary errors, mainly concerning the reliability of testimony from his co-conspirator Kevin Waltzer.

The former broker had wanted the court to consider evidence of Waltzer's substance abuse and mental illness, or his meetings with the SEC, but Greenaway said these factors cannot overcome "the extensive evidence in the trial record, including recordings of appellant discussing fraudulent activities, emails between appellant and co-conspirators regarding manipulative trades, voluminous records of the trades themselves, bank accounts and wire transfers."

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