Four Alleged Stock Defrauders from Georgia, New York and Texas Indicted for “Pump and Dump” Scheme Involving Three Public Companies
PHILADELPHIA – United States Attorney William M. McSwain announced that Ricardo Richardson, 50, of Buford, GA; John Scott Watkins, 54, of Canton, GA; Gary B. Wolff, 78, an attorney from New York, NY; and Edward Heil, 71, an accountant from Pearland, TX; were arrested and charged by Indictment with conspiracy, wire fraud, and securities fraud in connection with what is commonly referred to as a ”pump and dump” scheme.
The Indictment alleges that the defendants and others sought to generate illegal proceeds by manipulating the stock of three public companies: AI Document Services, Inc. (ticker symbol AIDC), Creative Edge Nutrition, Inc. (ticker symbol FITX), and Interactive Health Network (ticker symbol IGRW). This manipulative activity was designed to make it falsely appear that trading in those stocks was the result of free and fair market forces, and to conceal the activity from the U.S. Securities and Exchange Commission (the “SEC”).
The Indictment further alleges that, among other things, the defendants planned and took various fraudulent actions, including disguising their share ownership in these companies, paying large bribes to stockbrokers for prearranged purchases of AIDC, FITX, and IGRW stock on behalf of the brokers’ unknowing customers, hiring promoters to distribute misleading email newsletters regarding these companies to numerous potential investors throughout the United States, and causing the public companies to issue nationwide press releases to conceal the manipulative activity. The schemers intended to generate at least $15 million in proceeds from this scheme, which was implemented from mid-2014 through approximately February 2016, when the SEC suspended trading in these stocks.
Court documents also reveal that the defendants and their co-schemers had worked together on previous stock deals, and each performed different roles in the scheme. Watkins himself explained that he was on the stock side of the deals, and Richardson much of the negotiating. Wolff and Heil, in turn, supplied the public companies that the schemers used in the manipulations and assisted with some of the paperwork. As alleged, all of the defendants owned or controlled a substantial number of shares of AIDC, FITX, and IGRW stock and were prepared to sell them at a large profit into the manipulated markets to unsuspecting investors.
“Pump and dump stock schemes have real victims: those who play by the rules and save and invest in the markets,” said U.S. Attorney McSwain. “Market manipulation also causes generalized harm to the markets and to our economy because it erodes public trust that the markets are free and fair. Thanks to the excellent work of the FBI, SEC, and prosecutors from my Office, these four defendants will now face the consequences of their alleged actions.”
“The defendants allegedly employed fraud and misinformation in an attempt to boost these companies’ stocks,” said Michael J. Driscoll, Special Agent in Charge of the FBI’s Philadelphia Division. “Their ‘business model’ was nothing but a classic pump and dump scheme from which they sought to handsomely profit. The FBI will continue to investigate and shut down such illegal activity, to protect both the public and the integrity of our financial markets.”
If convicted, the defendants each face a maximum possible sentence of 65 years in prison, 3 years of supervised release, a $10,500,000 fine, and a $400 special assessment.
The case was investigated by the Federal Bureau of Investigation, and is being prosecuted by Assistant United States Attorneys Judy Smith and Patrick J. Murray. The U.S. Attorney’s Office also acknowledges the substantial assistance provided by the U.S. Securities and Exchange Commission, Philadelphia Regional Office in this investigation.
An indictment, information, or criminal complaint is an accusation. A defendant is presumed innocent unless and until proven guilty.