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Thursday, October 27, 2011

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Florida Broker-Dealer Sentenced to 105 Months in Prison
For Defrauding Customers
- Used Customer Accounts in $3.8 Million Investment Scheme
That Targeted Senior Citizens -

     WASHINGTON - Anthony Fareri, 46, of Boca Raton, Fla., was sentenced today to 105 months in prison for his role in a scheme to defraud the customers of his privately held brokerage firm of more than $3.8 million, announced U.S. Attorney Ronald C. Machen Jr., James W. McJunkin, Assistant Director in Charge of the FBI’s Washington Field Office, and Daniel S. Cortez, Inspector in Charge, Washington Division, U.S. Postal Inspection Service.

     Fareri pled guilty in September 2010 in the U.S. District Court for the District of Columbia to mail fraud and aiding and abetting the commission of a long running scheme to defraud unwitting investors. He was sentenced by the Honorable Emmet G. Sullivan. The Court also ordered Fareri to pay restitution of $3,646,747 and forfeiture in the same amount. Upon completion of his prison term, Fareri will be placed on three years of supervised release.

     According to a statement of offense agreed to by the government and defendant, Fareri and Paul Harary, a South Florida investor, devised and carried out a scheme to defraud Fareri’s clients by purchasing on their behalf shares of two thinly traded shell companies: American Financial Holdings, Inc. (AFHJ) and Secure Solutions Holdings, Inc, (SSLX). In 2004 and 2005, Harary paid Douglas Zemsky, a stock investor from Florida specializing in obtaining and selling publicly-traded shell companies, to acquire control of AFHJ and SSLX and give him secret control of the majority of the free-trading shares. Fareri and Harary would coordinate prearranged “matching” trades, whereby Fareri’s customers, sometimes unbeknownst to them, would purchase Harary’s AFHJ and SSLX shares at artificially inflated prices.

     To carry out the scheme, Fareri had some of his clients sign blank forms, including unsolicited trade letters, account opening forms and account update forms, that he later had filled in with misleading information about the clients’ investment objectives. Fareri also made false and misleading statements to his clients about their investments, and disregarded his customers’ orders to sell their shares of AFHJ and SSLX.

     In exchange for Fareri purchasing shares of AFHJ and SSLX for his clients at artificially inflated prices, Harary paid Fareri approximately $820,000 in disguised kickback payments. The scheme began to collapse in July 2005 when the Securities and Exchange Commission temporarily halted trading in SSLX because of concerns about the accuracy of press releases and the identity of the company’s management. Once Fareri and Harary ceased propping up the shell companies’ stock, the prices of AFHJ and SSLX plummeted, and Fareri’s clients – many of whom were senior citizens – lost more than $3.8 million.

     Harary, now 47, and Zemsky, now 48, each pled guilty in 2007 to a charge of conspiracy to commit mail and wire fraud. Harary was sentenced to 60 months of incarceration and Zemsky was sentenced to 41 months in prison.

     In announcing the sentence, U.S. Attorney Machen, Assistant Director McJunkin and Inspector in Charge Cortez praised the investigative efforts of the Special Agents of the FBI’s Washington Field Office and the U.S. Postal Inspection Service and also recognized the work of U.S. Attorney’s Office Paralegal Specialist Diane Hayes and Legal Assistant Krishawn Graham. Finally, they commended the efforts of Special Assistant U.S. Attorney Matthew Skidmore of the SEC Enforcement Division, and former Assistant U.S. Attorneys Vasu Muthyala and John Griffith, who prosecuted this case.




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