Union County, New Jersey, Man Charged In Microcap Stock Manipulation Scheme
NEWARK, N.J. – The owner of a purported business consulting firm was arrested today for operating a $1.1 million scheme that artificially inflated the stock price of a publicly traded company he controlled, Acting U.S. Attorney William E. Fitzpatrick announced.
James Farinella, 46, of Springfield, New Jersey, is charged by complaint with one count of securities fraud. He will make his initial appearance this afternoon before U.S. Magistrate Judge Leda D. Wettre in Newark federal court.
According to the complaint:
From June 2012 through December 2012, Farinella and others allegedly operated a “pump-and-dump” stock manipulation scheme to fraudulently inflate the prices of Pazoo Inc. (PZOO). Pazoo had little or no real business operations, and when it started trading in June 2012, Farinella controlled 98 percent of the free-trading shares in Pazoo.
Farinella and other conspirators allegedly “pumped” the price of those shares by orchestrating a series of trades between accounts they controlled to create the appearance that Pazoo stock was rising in price and heavily traded. In order to further inflate the prices, Farinella and his conspirators also disseminated misleading promotional materials to lure investors to purchase the stocks, including touting Pazoo as a leading provider of nutritional supplements for people and their pets.
After pumping the stocks, Farinella and his conspirators “dumped” them by selling large volumes of the stock to investors at artificially inflated prices. The companies’ stock prices then dropped, causing victims of the scheme to suffer losses. The alleged stock manipulation scheme generated approximately $1.1 million in gross trading proceeds.
The securities fraud count carries a maximum potential penalty of 20 years in prison and a $5 million fine.
The charge and allegations in the complaint are merely accusations, and the defendant is considered innocent unless and until proven guilty.
The U.S. Securities and Exchange Commission (SEC) is filing a civil complaint against Farinella today.
Acting U.S. Attorney Fitzpatrick credited special agents of the FBI, under the direction of Special Agent in Charge Timothy Gallagher in Newark, with the investigation. He also thanked the U.S. Securities and Exchange Commission’s New York Regional Office, under the direction of Andrew Calamari, for its assistance in this matter.
The government is represented by Assistant U.S. Attorney Justin S. Herring of the U.S. Attorney’s Office Economic Crimes Unit in Newark.