Three Defendants Convicted in Securities Fraud Investigation
A New York stock promoter, a Colorado registered stock transfer agent, and a California securities attorney were recently convicted of securities fraud offenses. These cases pertain to a conspiracy to sell shares of fraudulently registered companies that could then be used for pump and dump and other stock manipulation schemes. To date, ten defendants have been convicted in connection with the investigation.
Randy A. Hummel, Executive Assistant United States Attorney, U.S. Attorney’s Office for the Southern District of Florida, Robert F. Lasky, Special Agent in Charge, Federal Bureau of Investigation (FBI), Miami Field Office, and Andrew W. Vale, Assistant Director in Charge, FBI, Washington Field Office, made the announcement.
John Ahearn, 56, of Erie, Colorado and formerly of Miller Place, New York, and Andrew H. Wilson, 69, of Nevada City, California, plead guilty on January 25, 2018, of conspiracy to unlawfully sell unregistered securities, in violation of 18 U.S.C. § 371, in Case No. 17-CR-20883-KMW. Each defendant faces a maximum statutory sentence of five years in prison and a fine up to $250,000 or double the proceeds of the offense. Sentencing is scheduled for Ahearn and Wilson on June 8, 2018, before U.S. District Judge Kathleen M. Williams.
Yelena Furman, 36, of New York, New York, plead guilty on January 23, 2018, of conspiracy to commit securities fraud, in violation of 18 U.S.C. § 1349 in Case No. 17-CR-2-713-CMA. Furman faces a maximum statutory sentence of 25 years in prison and a fine of up to $250,000 or double to proceeds of the offense. Sentencing is scheduled for Furman on April 25, 2018, before U.S. District Judge Cecilia M. Altonaga.
Seven other defendants were previously convicted in connection with this investigation: David Lubin, Case No. 17-20508-CR-MGC; Sheldon Rose and Ian Kass, Case No. 16-20706-CR-JEM; Steven Sanders and Alvin Mirman, Case No. 16-20572-CR-CMA; and, Daniel McKelvey and Jeffrey Lamson, Case No. 16-20546-CR-RNS.
According to court documents, from early 2007 through at least 2014, Sanders, McKelvey, Lubin and other conspirators would fraudulently create public companies, known as issuers, by filing documents with the SEC that falsely described the companies and their share ownership. These documents would indicate that the companies were controlled by a nominee, or straw chief executive officer (CEO). The straw CEO would be listed as the owner of the control block, or restricted shares, but in reality the companies were controlled by the principals. The principals would also create documents with the names of various shareholders for each company, to make it appear that these shares were owned by persons unaffiliated with the company. These shares would later be classified as unrestricted or “free trading.” Thereafter, the principals would sell the companies to criminal actors who would secretly obtain the control shares and the purported “free trading” shares, without disclosure to the SEC or the investing public. This would allow the buyers to engage in stock manipulation schemes using the purported “free trading” shares. According to documents filed in court, Furman, Ahearn and Wilson engaged in acts that furthered the conspiracy so that they could personally profit.
According to court filings, Lubin created Entertainment Art, Inc., (“EERT”) using false and fraudulent documents, and then sold it in approximately 2009 to Myron Gushlak (who also is charged in Case No. 17-CR-2-713-CMA). Gushlak was convicted in a separate securities fraud case in the Eastern District of New York and was sentenced to prison in November 2010. Shortly before he went to prison, Gusklak asked Sanders and others to sell the company and to provide the proceeds to himself and his then girlfriend, Furman.
According to court filings, Sanders, Furman and Lubin and other conspirators acted together to cause securities filings in the name of EERT, that falsely described the management of the company and its share structure.
According to court filings, Ahearn was the owner of Manhattan Transfer Registrar Co. (“Manhattan Transfer”), a stock transfer agent with offices in New York and Colorado. Ahearn became aware that the EERT shares were listed in the names of straw shareholders but were in fact controlled by undisclosed principals. In approximately October 2012, Ahearn assisted with the unlawful transfer of EERT shares to certain shell buyers, who changed the name to Biozoom, Inc. (“BIZM”) and, in May 2013, used the BIZM shares for a pump and dump stock swindle.
Wilson, according to court filings, was an attorney licensed to practice law in California who authored false and fraudulent legal opinion letters for EERT. These letters falsely stated that shares of the companies were owned by persons who were not “affiliates,” and were used by persons who acquired the shares to deposit them with brokers and unlawfully them to the investing public. In reality, Wilson took his direction from Sanders and another conspirator, McKelvey, whom Wilson came to learn secretely controlled the companies.
Furman, according to court filings, participated in the filing of certain fraudulent documents with the SEC for companies controlled by Gushlak. Furman also assisted Gushlak with taking certain elaborate steps to conceal funds transfers to herself, including in relation to EERT. Documents filed in court allege that, because Gushlak’s assets were frozen by the New York federal court, and he had been ordered to pay a $25 million fine and restitution of approximately $17.4 million, Gushlak, Furman, Sanders and others engaged in elaborate steps to hide and conceal the proceeds of the EERT stock sales. This included wiring funds to an intermediary in Switzerland and to an account controlled by Furman in New York that was used to pay Gushlak’s bills while he was in prison.
Mr. Hummel commended the investigative efforts and coordination of the FBI’s Miami Field Office and Washington Field Office. Mr. Hummel also thanked the SEC’s Miami Regional Office and Washington Home Office for their assistance. The SEC previously filed parallel civil enforcement actions related to this matter. These cases are being prosecuted by Assistant U.S. Attorney Jerrob Duffy.