WASHINGTON – Six individuals, including a securities attorney, were charged in an indictment unsealed today with defrauding investors in a stock manipulation scheme from 2003 to 2008, announced Assistant Attorney General Lanny A. Breuer of the Criminal Division, Deputy Chief Inspector Daniel S. Cortez for the U.S. Postal Inspection Service (USPIS) and James W. McJunkin, Assistant Director in Charge of the FBI’s Washington Field Office. In a related action, the U.S. Securities and Exchange Commission (SEC) filed a civil complaint in the Southern District of Florida, Miami division.
The defendants charged in the indictment returned in the Southern District of Florida are: Jonathan Randall Curshen, 46, of Sarasota, Fla.; Michael Simon Krome, 49, a securities attorney from Long Island, N.Y.; Ronald Salazar Morales, aka “Ronny Salazar,” 39, of Costa Rica; Robert Lloyd Weidenbaum, 44, of Miami; and Eric Ariav Weinbaum, 37, and Izhack Zigdon, 47, of Israel. Curshen was arrested this morning in Sarasota, Fla., and made an initial appearance in U.S. District Court in Tampa, Fla. Krome was arrested in Long Island, N.Y., and will make an initial appearance later today in U.S. District Court in Central Islip, N.Y. Weidenbaum was arrested today in Miami and is making his initial appearance in U.S. District Court in Miami at 2 p.m. EST. Zigdon was previously arrested in Germany in October 2010 and the United States is seeking his extradition.
“The indictment unsealed today alleges that the defendants used their access and training to illegally manipulate stock prices for their own advantage,” said Assistant Attorney General Breuer. “Pump and dump schemes like the one alleged in this case leave legitimate investors holding worthless stocks. Anyone who defrauds the investing public in this way – whether you are a securities lawyer, a stock trader, or a simple fraudster – will be held to account.”
According to the indictment, Curshen was the principal behind Red Sea Management and Sentry Global Securities, two companies located in San Jose, Costa Rica, that provided offshore accounts and facilitated trading in penny stocks. The indictment alleges that Weinbaum and Zigdon took control of the outstanding shares of a company called CO2 Tech (ticker CTTD), which traded in the over-the-counter market through listings on Pink Sheets, an inter-dealer electronic quotation and trading system. Weinbaum and Zigdon allegedly obtained the shares by retaining Krome who allegedly employed a method to evade federal securities registration requirements in order to provide co-conspirators with millions of unregistered and “free-trading” shares of CO2 Tech that the co-conspirators could not have otherwise legally obtained.
The indictment alleges that the shares were subsequently sold to the general investing public by Weinbaum, Zigdon, Curshen and Salazar, a Sentry Global stock trader, through Sentry Global’s stock trading floor in Costa Rica. According to the indictment, the co-conspirators were able to hide from the investing public the actual financial condition and business operations of the company by evading the registration requirements. The indictment also alleges that Weidenbaum was paid approximately $1 million by Weinbaum and Zigdon to participate in sham stock trades of CO2 Tech to make it appear that there were genuine investors in the market that were buying the shares.
As alleged in the indictment, coordinated trades were often made between the co-conspirators in conjunction with the issuance of false and misleading press releases that were designed to make CO2 Tech appear that it had significant business prospects. According to these press releases, CO2 Tech purported to have a business relationship with Boeing to reduce polluting gases emitted from airplanes. The indictment alleges that these relationships never existed.
After fraudulently “pumping” the market price and demand for CO2 Tech stock through these press releases and coordinated trades, Weinbaum, Zigdon, Curshen and Salazar allegedly “dumped” shares by selling them for large profits to the general investing public in the over-the-counter market through listings on Pink Sheets. These shares were allegedly purchased by unsuspecting investors, including in the Southern District of Florida, and were often rendered virtually worthless.
The defendants are charged with one count of conspiracy to commit securities, mail and wire fraud. Additionally, Weinbaum and Zigdon are charged with three counts of wire fraud, Weidenbaum with two counts of wire fraud and Krome with one count of wire fraud; Curshen and Salazar are charged with two counts of mail fraud, Weinbaum and Weidenbaum with one count of mail fraud; and Krome is charged with one count of violating the securities registration laws and one count of obstruction of justice. The indictment also seeks forfeiture from the defendants.
The conspiracy charge carries a maximum penalty of five years in prison and a $250,000 fine. Each count of wire fraud and mail fraud carries a maximum penalty of 20 years in prison and a $250,000 fine. The securities registration violation carries a maximum penalty of five years in prison and a $10,000 fine, while the obstruction count carries a maximum penalty of 20 years in prison and a $250,000 fine.
In a related civil matter, the SEC charged Curshen, Krome, Salazar, Weinbaum and Zigdon with violations of the Securities Act of 1933 and violations of the Securities Exchange Act of 1934. Weidenbaum is charged with aiding and abetting certain violations by Weinbaum and Zigdon.
An indictment is merely a charge and defendants are presumed innocent until proven guilty.
The case was investigated by the FBI’s Washington Field Office and the USPIS. The case is being prosecuted by Trial Attorneys N. Nathan Dimock and Rina Tucker Harris of the Criminal Division’s Fraud Section. The U.S. Attorney’s Office for the Southern District of Florida provided significant assistance in this case. The Department of Justice acknowledges the significant assistance of the Financial Industry Regulatory Authority (FINRA) and the SEC in its investigation. The Criminal Division’s Office of International Affairs and Costa Rican authorities also provided assistance.
President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.