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    United States Attorney's Office
    Central District of California

    Thom Mrozek
    Public Affairs Officer

    (213) 894-6947
    thom.mrozek@usdoj.gov



    Return to the 2010 Press Release Index
    Release No. 10-159

    October 27, 2010

    LONG BEACH MAN INDICTED ON FEDERAL FRAUD CHARGES FOR PROMOTING ‘PUMP AND DUMP’ OF PUBLICLY TRADED COMPANY

    SANTA ANA, California – A federal grand jury today named a Long Beach man in an 11-count indictment that accuses him of running a “pump and dump” scheme that allowed him to artificially generate market demand for a penny stock issued by a sports drink company.

    Chad Peter Smanjak, 37, was indicted on 10 counts of aiding and abetting wire fraud and one count of conspiring to launder money. Smanjak fled to his native South Africa earlier this year after authorities executed a search warrant and is considered a fugitive.

    The indictment alleges that Smanjak and others obtained millions of shares of stock in Rudy Nutrition (RUNU and RUDN) and then “pumped” the stock by issuing false and misleading press releases and by trading RUNU stock among themselves. As a result of their activities, Smanjak and the others artificially increased the trading volume of RUNU stock and generated the appearance of market demand. The indictment alleges that Smanjak and others then “dumped” approximately 600 million shares of RUNU on the market, fraudulently realizing a profit of approximately $5.2 million.

    As part of the scheme alleged in the indictment, Smanjak worked with others to have approximately 634,573,619 RUNU shares issued to several Panamanian companies he controlled. These nominee companies then sold most of the RUNU shares over a five-month period in 2008 until the U.S. Securities and Exchange Commission halted trading of RUNU shares. With money sitting in the brokerage accounts of the Panamanian companies, Smanjak directed others to wire proceeds of the stock sales to Panamanian banks, then back to United States accounts he and his co-conspirators controlled.

    As part of the scheme, Smanjak paid his trader with a $400,000 Lamborghini Murcielago, which has been seized by U.S. Immigration and Customs Enforcement as part of the investigation.

    “Americans should be able to invest their money knowing they are protected against fraudulent transactions, such as the scam allegedly perpetrated by the defendant in this case,” said Claude Arnold, Special Agent in Charge for ICE Homeland Security Investigations in Los Angeles. “Homeland Security Investigations will vigorously pursue those who exploit our nation’s financial systems to defraud unwitting victims and deprive them of their hard-earned savings.”

    Leslie P. DeMarco, Special Agent in Charge of IRS - Criminal Investigation’s Los Angeles Field Office, commented: “Stock pump-and-dump schemes hurt the small investor while profiting the promoter. If Mr. Smanjak’s scheme, which resulted in a profit of $5.2 million, was legal, why did he engage in nearly $1.7 million in money laundering transactions designed to conceal the proceeds of his scheme? Because his scheme was criminal in nature and he wanted desperately to avoid detection. IRS - Criminal Investigation is united with our law enforcement partners to disrupt investment schemes and prosecute promoters who commit crimes for their own personal financial gain.”

    An indictment contains allegations that a defendant has committed a crime.  Every defendant is presumed to be innocent until proven guilty in court.

    The CEO of Rudy Nutrition was Daniel “Rudy” Ruettiger, whose story of becoming a member of the Notre Dame Fighting Irish football team is depicted in the 1993 film, “Rudy.” Rudy Nutrition purported to sell health-conscious beverages as an alternative to high-sugar soda and sports drinks. On November 14, 2008, the Securities and Exchange Commission revoked the registration of each class of registered securities of Rudy Nutrition for failure to make required periodic filings with the Commission.

    This case against Smanjak is the result of an investigation by U.S. Immigration and Customs Enforcement Office of Homeland Security Investigations, and IRS - Criminal Investigation, which received assistance from the Securities and Exchange Commission. The United States Attorney’s Office for the District of Delaware also provided assistance.

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    Release No. 10-159

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