Suspended Attorney Indicted for Securities Fraud
Defendant Forged Signatures and Backdated Documents as Part of a $3 Billion Pump-and-Dump Scheme
Today, before United States Magistrate Judge Vera M. Scanlon, suspended attorney Christopher Davies was arraigned on a four-count indictment charging securities fraud, conspiracy to commit securities fraud, wire fraud, and aggravated identity theft in connection with a market manipulation scheme. A federal grand jury in Brooklyn returned the indictment on August 30, 2018. Davies was previously arrested on a complaint in April 2018.
Richard P. Donoghue, United States Attorney for the Eastern District of New York, William F. Sweeney, Jr., Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office (FBI), and Edward Gallashaw, Assistant Postal Inspector-in-Charge of the New York Division of the U.S. Postal Inspection Service (USPIS), announced the indictment.
“As alleged in the indictment, Davies used both sophisticated means and some of the oldest tricks in the book, including backdating documents and forging signatures, to deceive the investing public and manipulate the price and ownership of a public company’s stock,” stated United States Attorney Donoghue. “The defendant’s scheme ultimately failed as a result of the outstanding investigative work by our prosecutors and our law enforcement partners, who are committed to protecting the integrity of public markets.” Mr. Donoghue also expressed his gratitude to the New York Office of the United States Securities and Exchange Commission for its assistance during the investigation.
“Criminals take what isn’t theirs and have no regard for victims they harm in the process,” stated FBI Assistant Director-in-Charge Sweeney. “Mr. Davies allegedly pumped up the price of the stock for a public company because he controlled the information being made public, he knew exactly when to sell to make the most money, leaving other investors in the lurch. Instead of enjoying the large sum of money he made, he now faces time in prison.”
“This is a classic case of greed overcoming honest business practices,” stated USPIS Assistant Postal Inspector-in-Charge Gallashaw. “Mr. Davies allegedly used his knowledge of the market to ‘increase’ the value of stock he knew was worth pennies, taking money from investors he knew would result in a loss. While Mr. Davies tried to cover his illegal tracks with bogus documents, he couldn’t cover-up his crimes from Postal Inspectors and their law enforcement partners.”
Davies, an attorney whose law license was suspended, controlled a publicly traded company, American Transportation Holdings Inc. (“ATHI”), and manipulated the price of its stock in a pump-and-dump scheme. Beginning in 2012, Davies exercised secret control over ATHI and its predecessor companies (collectively “ATHI” or the “company”) through a series of nominal Chief Executive Officers. As a part of his scheme, Davies accumulated a large number of shares in the company by fraudulently converting corporate debt into stock at no cost. To effect these fraudulent debt-to-stock conversions, Davies forged the signatures of purported ATHI board members and backdated documents. After accumulating large amounts of ATHI stock, Davies artificially increased the price of ATHI’s stock through false and misleading press releases claiming that ATHI had developed proprietary gaming and live-streaming app technology. Although ATHI’s stock had historically traded for pennies, its price rose to $12 per share at the height of the pump, resulting in a market capitalization of over $3 billion. Davies’ coconspirators then dumped ATHI stock at a profit, causing heavy losses to investors.
The charges in the indictment are allegations, and the defendant is presumed innocent unless and until proven guilty. If convicted of wire fraud, the top count in the indictment, Davies faces a maximum sentence of 20 years’ imprisonment.
The government’s case is being handled by the Office’s Business and Securities Fraud Section. Assistant United States Attorneys Kaitlin Farrell and Mark Bini are in charge of the prosecution.
E.D.N.Y. Docket No. 18-CR-479 (FB)