Investor Pleads Guilty In Manhattan Federal Court To Engaging In Market Manipulation Schemes Involving Two Different Stocks
FOR IMMEDIATE RELEASE
Wednesday May 9, 2012
Preet Bharara, the United States Attorney for the Southern District of New York, and Janice K. Fedarcyk, the Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), announced that investor DAVID BLECH pled guilty today in Manhattan federal court to two counts of securities fraud arising from schemes to manipulate the market for securities of Pluristem Therapeutics, Inc. (“Pluristem”) and Intellect Neurosciences, Inc. (“Intellect”) in 2007 and 2008. BLECH manipulated the markets for these securities by selling a portion of his holdings in those companies through deceptive and illegal means calculated to hide his selling activity and minimize the downward pressure that his sales would otherwise have had on the value of the Pluristem and Intellect stock that he continued to hold. BLECH pled guilty before United States Magistrate Judge Frank Maas.
According to the Information and statements made during today’s guilty plea proceeding:
Between January 2007 and May 2007, BLECH acquired significant holdings of Pluristem stock, which was traded on the OTC Bulletin Board, in connection with a private placement offering by Pluristem. BLECH acquired this stock in numerous brokerage accounts that were nominally held in the names of other individuals and entities but which he, in fact, controlled (the “Nominee Accounts”).
In May 2007, BLECH began to sell a portion of his Pluristem holdings. In order to conceal his sales – and thereby mitigate the damage that public awareness of his selling activity would have had on the value of his remaining shares – BLECH caused the various Nominee Accounts under his control to engage in conflicting activity, with some of the accounts selling Pluristem stock, and other accounts buying Pluristem stock, often on the same day. In total, between May 15, 2007 and September 14, 2007, BLECH used the Nominee Accounts to sell approximately 150 million shares of Pluristem, while also using the accounts to buy approximately 100 million shares of Pluristem. In so doing, BLECH was able to shed approximately 50 million shares of Pluristem through manipulative and fraudulent trading activity calculated to hide the true nature of his selling activity while also indicating false levels of liquidity and demand in the market for that stock.
In February and March 2008, BLECH engaged in a similar scheme involving the market for shares of Intellect, which was traded on the OTC Bulletin Board. Between 2005 and February 2008, BLECH acquired significant holdings of Intellect stock. As with Pluristem, BLECH acquired this stock in the Nominee Accounts that were listed in the names of other individuals and entities but which he, in fact, controlled.
In February and March 2008, BLECH sold a portion of his Intellect holdings. Again, in order to conceal his sales – and thereby mitigate the damage that public awareness of his selling activity would have had on the value of his remaining shares – BLECH caused the various Nominee Accounts under his control to engage in conflicting activity, with some of the accounts selling Intellect stock, and other accounts buying Intellect stock, often on the same day. In total, BLECH used the Nominee Accounts to sell approximately 2 million shares of Intellect, while also using the accounts to buy approximately 1.6 million shares of Intellect. In so doing, BLECH was able to shed approximately 400,000 shares of Intellect through manipulative and fraudulent trading activity calculated to hide the true nature of his selling activity while also indicating false levels of liquidity and demand in the market for that stock.
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BLECH, 56, of New York, New York, pled guilty to two counts of securities fraud. He faces a statutory maximum of 40 years in prison, a fine of $10 million or twice the gross gain or loss from the offense, and a maximum period of three years of supervised release.
BLECH is scheduled to be sentenced by United States District Judge Colleen McMahon on August 31, 2012.
Mr. Bharara praised the investigative work of the FBI. He also thanked the U.S. Securities and Exchange Commission for its assistance.
This case was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force, on which Mr. Bharara serves as a Co-Chair of the Securities and Commodities Fraud Working Group. 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.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorney Michael A. Levy is in charge of the prosecution.