Guy Gentile, who owns a New York-based brokerage firm, is charged with fraudulently inflating two micro-cap stocks’ prices before selling them to investors. His alleged actions purportedly allowed him to make $17.2M in gross trading proceeds.
Gentile was indicted in federal court. He and co-conspirators Itamar Cohen and Michael Taxon, both Canadian stock promoters, are accused of buying Kentucky USA Energy Inc. and Raven Gold Corp. shares from 4/07 to 6/08 and then using misleading marketing collateral and manipulative trading to inflate the shares. Taxon and Cohen have already pleaded guilty to their involvement in the Ponzi scheme. Gentile, who is charged with securities fraud and conspiracy to commit securities fraud, could be facing twenty years in prison.
Running a Ponzi scam is not the only way to get in trouble for it. Connecticut fund manager Marlon Quann has been ordered to surrender nearly $81M in profit for helping Thomas Petters run his $3.5B Ponzi scheme. The U.S. Securities and Exchange Commission said that Quann hid evidence of the fraud in part with $187M in “round trip” transactions.” The SEC also sued Quan’s Acorn Capital Group LLC, Stewardship Investment Advisors LLC, and ACG II LLC.
He appealed a 2014 disgorgement order and a verdict by a federal jury that found him liable for fraud when, they said, he breached several securities laws. Now, an appeals court in St. Louis said that a judge could make him pay the $81M he made in the purported scheme.
This type of fraud usually involves supposed returns used to pay existing investors, when, typically, the returns are typically not returns at all. Instead, they are usually funds contributed by newer investors and used to pay earlier investors. In a Ponzi scam, high returns are typically promised, along with the enticement of purportedly no or little risk. Ponzi scams usually fail when the number of new investors dwindle or too many investors seek to redeem their money at once.
Broker-dealer owner indicted in $17 million pump-and-dump scheme, InvestmentNews, March 23, 2016
Hedge Fund Manager Ordered to Pay $81 Million in Ponzi Case, Bloomberg, March 22, 2016