Stock Broker and Partner Arrested for Microcap Stock Manipulation Scheme
BOSTON – A former New Hampshire stock broker and his Florida-based partner were arrested today on charges arising out of their participation in a market manipulation scheme which was actually part of an FBI undercover operation.
Robert Raffa, 56, of Penacook, NH., and David Aubel, 57, of Marco Island, Fla., were charged in a criminal complaint with conspiracy and wire fraud based on their involvement in a scheme to manipulate the market for the publicly traded securities of Green Energy Renewable Solutions, Inc., a penny stock company that claimed to be in the business of developing and operating waste processing and recycling facilities near Detroit, MI. They were arrested at their respective homes in New Hampshire and Florida.
According to the charging documents, in early 2012, Raffa and Aubel used four foreign entities to covertly acquire nearly all of Green Energy’s unrestricted stock without reporting their controlling interest as required by law. They then hired a promoter to send blast e-mails touting Green Energy to potential investors. Meanwhile, it is alleged that Raffa and Aubel were furiously selling their shares without disclosing that they had orchestrated the campaign encouraging investors to buy.
As alleged in the criminal complaint, the initial promotion enabled Raffa and Aubel to sell more than 1.5 million shares of Green Energy stock for proceeds of about $950,000. However, Raffa and Aubel continued to control a substantial amount of Green Energy stock after the promotion ended, so they used manipulative trading techniques to stabilize Green Energy’s stock price while they searched for another promoter to run a second touting campaign. Their search led them to a stock promoter who was secretly cooperating with the FBI and an undercover FBI agent who claimed to have access to a network of corrupt stock brokers who would buy Raffa’s and Aubel’s shares and place them in customer accounts in exchange for kickbacks. Raffa and Aubel allegedly executed a trade in which they sold 174,000 shares of their Green Energy stock to an account purportedly controlled a corrupt broker, which in fact was controlled by the FBI. Following the trade, Raffa and Aubel wired $6,000 to an account they believed to be controlled by the corrupt broker, but which was actually controlled by the FBI.
In a parallel action, the Securities and Exchange Commission (SEC) announced securities fraud charges today against Raffa and Aubel in connection with the scheme.
These charges arise out of a multi-year investigation focusing on preventing fraud in the microcap stock markets. Microcap companies are small publicly traded companies whose stock often trades at pennies per share. Fraud in the microcap markets is of increasing concern to regulators as such markets have proven to be fertile grounds for fraud and abuse. This is, in part, because accurate information about microcap stocks may be difficult for the average investor to find, since many microcap companies do not file financial reports with the SEC.
Today’s charges follow a series of cases filed by the U.S. Attorney for the District of Massachusetts and the SEC in which more than 30 individuals have been criminally charged and convicted for using kickbacks and other schemes to trigger investment in, or manipulate the stock of, thinly-traded stocks.
The charge of conspiracy provides a sentence of no greater than five years in prison, three years of supervised release and a fine of $250,000, or twice the gross loss. The charge of wire fraud provides a sentence of no greater than 20 years in prison, three years of supervised release, and a fine of $250,000, or twice the gross gain or loss. Actual sentences for federal crimes are typically less than the maximum penalties. Sentences are imposed by a federal district court judge based upon the U.S. Sentencing Guidelines and other statutory factors.
United States Attorney Carmen M. Ortiz and Harold H. Shaw, Special Agent in Charge of the Federal Bureau of Investigation, Boston Field Division made the announcement today. The United States Attorney’s Office received valuable assistance from the SEC during the investigation of this matter. The case is being prosecuted by Assistant U.S. Attorney Vassili Thomadakis of Ortiz’s Criminal Division and SEC attorney Andrew Palid, who was appointed as a Special Assistant U.S. Attorney.
The details contained in the charging document are allegations. The defendants are presumed to be innocent unless and until proven guilty beyond a reasonable doubt in a court of law.