David Levy And Donna Levy Found Guilty In Manhattan Federal Court Of Orchestrating “Pump And Dump” Stock Fraud Schemes
David Levy Also Convicted of International Money Laundering Scheme
Preet Bharara, the United States Attorney for the Southern District of New York, announced that DAVID LEVY and DONNA LEVY were found guilty yesterday on all counts against them in an Indictment charging them with orchestrating so-called “pump and dump” stock fraud schemes that employ the Internet and social networking sites, among other tools, to manipulate the price of penny stocks. DAVID LEVY also was found guilty of participating in an international money laundering scheme. The defendants were convicted after a three-week jury trial before U.S. District Judge Paul A. Crotty.
According to the evidence introduced at trial, other proceedings in this case, and documents previously filed in Manhattan federal court:
The Start-Up Company Stock Fraud Scheme
DAVID LEVY and DONNA LEVY were convicted of conspiracy to commit wire fraud and securities fraud, and of committing securities fraud, in connection with their efforts to orchestrate multi-year pump and dump schemes involving two companies that they helped take public: Cardiac Network, Inc., which has traded under symbol “CNWI,” and Banneker, Inc., which has traded under symbol “BANI.” The scheme worked as follows: DAVID LEVY and DONNA LEVY offered to help start-up companies obtain financing, take the start-up companies public, and coordinate marketing and investor relations for the companies, in exchange for company shares.
Once the companies had gone public, DONNA LEVY put out press releases on behalf of the target companies, and she worked with DAVID LEVY to secretly fund and distribute misleading third-party “buy” recommendations concerning the targeted companies.
This misleading promotional campaign, along with other manipulative conduct, caused demand for stock in the targeted companies, and the price of the stock to rise. DAVID LEVY, DONNA LEVY, and their co-conspirators took advantage of the “pumped-up” stock trading volume and prices to “dump” their shares into the market until the misleading promotional campaign had run out of steam. They would repeat the scheme multiple times until the target companies’ shares were essentially valueless, thereby harming company founders and executives, as well as innocent investors who bought in reliance on the misleading promotional campaigns they orchestrated.
DAVID LEVY was also convicted of securities fraud in connection with his efforts to orchestrate a multi-year pump and dump scheme involving a third company that he helped take public: Greenway Design Group, Inc., which has traded under symbol “GDGI.” Evidence presented at trial demonstrated that DAVID LEVY awarded himself secret shares in GDGI in the name of a Panamanian shell company maintained by a money launderer.
The International Money Laundering Scheme
Additionally, DAVID LEVY was convicted of a money laundering conspiracy for his efforts to conceal more than $2.3 million in proceeds from the fraudulent schemes in Panamanian shell company bank accounts maintained at a bank in Panama. In connection with the scheme, DAVID LEVY wire transferred $150,000 in fraud proceeds to a Panamanian shell company bank account through a bank account in New York. He carried over to Panama $2 million in cashiers’ checks, representing proceeds from stock fraud, and deposited it into the shell company bank account.
The Manipulation-For-Hire Scheme
In addition to being convicted of the charges above, DONNA LEVY also was convicted of two counts arising from her participation in a manipulation-for-hire scheme. As demonstrated at trial, DONNA LEVY was paid by others who were interested in dumping large holdings of penny stocks into the market, or through intermediaries, to post or fund misleading stock “buy” recommendations on purportedly independent stock analysis websites and email newsletters. Participants in the scheme would also engage in manipulative trading activity concerning stocks that they were paid to help manipulate. They did so knowing that their conduct would help pump up the prices of the stocks they were manipulating so that they could sell and make quick profits from unsuspecting investors who would be harmed once the secretly-funded manipulative campaign ended and the stock crashed.
DONNA LEVY was convicted of conspiracy to commit wire fraud and securities fraud, and of committing securities fraud, in connection with her efforts to orchestrate a pump and dump scheme as a manipulator for hire in connection with a purported company called Emerging World Pharma, Inc., which has traded under symbol “EWPI.”
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DAVID LEVY, 60, of Fort Lauderdale, Florida, faces a maximum sentence of 85 years in prison, and a fine of over $5,000,000, in addition to forfeiture of the proceeds of the crimes. DONNA LEVY, 57, of Fort Lauderdale, Florida, faces a maximum sentence of 70 years in prison, and a fine of over $5,000,000, in addition to forfeiture of the proceeds of the crimes. A sentencing date has not yet been set for either defendant.
Nine additional defendants have already pled guilty to charges arising out of the conduct alleged in the Indictment, and three of the nine have been sentenced. The relevant plea dates and, where applicable, the sentences imposed are set forth in the attached chart.
This case originated and the schemes were uncovered as part of the Government’s long-term investigation into criminal conduct at the Port of New York-New Jersey. Mr. Bharara thanked the Internal Revenue Service-Criminal Investigations’ New Jersey office, as well as the other participants in the High Intensity Drug Trafficking Area Task Force, which includes the Drug Enforcement Administration and Immigration and Customs Enforcement’s Homeland Security Investigations’ New Jersey Offices, for their assistance with the investigation. Mr. Bharara also thanked the Securities and Exchange Commission and the Financial Industry Regulatory Authority for supporting the investigation, which is ongoing.
The case is being handled by the Office’s Public Corruption Unit. Assistant United States Attorneys Howard S. Master and Carrie H. Cohen are in charge of the prosecutions, and Andrew D. Goldstein is responsible for the asset forfeiture aspects of the case.