Recidivist Securities Fraud Defendant Edward Durante Pleads Guilty In Manhattan Federal Court To Securities Fraud, Money Laundering, And Perjury Offenses
Preet Bharara, the United States Attorney for the Southern District of New York, announced that EDWARD DURANTE, a/k/a “Ted Wise,” a/k/a “Efran Eisenberg,” a/k/a “Yulia,” a/k/a “Ed Simmons,” pled guilty today before U.S. Magistrate Judge Andrew J. Peck to conspiracy, securities fraud, money laundering, and perjury offenses stemming from a scheme, between 2009 and March 2015, to defraud at least 100 investors of more than $15 million, more than $9 million of which was funneled to DURANTE, his family, or co-conspirators. DURANTE executed the scheme – which principally involved a publicly traded Over-The-Counter company called VGTel, Inc. (“VGTL”) – through false and misleading representations about how private investor monies would be used, making material omissions in connection with the sale of VGTL securities, and through manipulation of the public market in VGTL’s stock. DURANTE, who was previously convicted of similar charges in this District in 2001 and was released from prison in 2009, arrived in the United States in December 2015 following his extradition from Germany. In January 2016, a superseding indictment (the “Indictment”) charging Christopher Cervino, a/k/a “Smitty,” Larry Werbel, and Sheik F. Khan, a/k/a “Abida Khan,” was unsealed and these defendants were arrested and charged for their involvement in the scheme. Two additional participants in the scheme, defendants Kenneth Wise and Walter Reissman, have pled guilty and are cooperating with the Government in this investigation:
U.S. Attorney Preet Bharara said: “Edward Durante embarked on the fraud scheme to which he pled guilty today while still in prison from a prior securities fraud conviction. Doing what he knows best, making money through deception, Durante lied to investors about how their money would be used and concealed his manipulation of the securities market. Edward Durante now awaits sentencing for securities fraud yet again.”
According to the allegations contained in the Indictment filed against DURANTE and his co-conspirators, and statements made in related court filings and proceedings:
2001 Securities Fraud Conviction
In December 2001, DURANTE was convicted in federal court of conspiracy to commit securities fraud, wire fraud, and money laundering, as well as making false statements in connection with a market manipulation scheme in which the defendant also used the alias “Ed Simmons.” The defendant was sentenced to 121 months in prison and was released in or about 2009, the year he began the current scheme. In connection with that scheme, DURANTE was ordered to pay disgorgement and prejudgment interest totaling over $39 million. DURANTE was also barred from certain activities in connection with the securities industry, including the sale of securities.
Private Placement Securities Fraud Involving VGTL
Beginning from when he was first in prison, between 2009 and in or about March 2015, DURANTE and his co-conspirators fraudulently induced victims to invest in private shares of VGTL by, among other things, concealing from investors that DURANTE controlled the entities selling the shares; that DURANTE was prohibited from any association with the sale of securities; and that DURANTE was previously convicted of crimes related to a similar scheme to defraud. Furthermore, some of the defendants lied to investors by (a) representing that their investments would be used to fund the operations and growth of VGTL in connection with potential reverse mergers, when in reality no reverse merger was ever consummated and the investments were instead used primarily to personally benefit the defendants; and (b) representing that the investors would receive an eight percent dividend on their investments until their private shares could be sold at a promised premium on the public market, when, in reality, no interest payments were ever provided to the investors and many investors never received VGTL stock certificates or were not permitted to sell the stock. In order to fund his illegal scheme, DURANTE used a network of brokers, including Werbel and Khan, investment advisers in Cleveland, Ohio, and Los Angeles, California, respectively, to induce investors to buy shares of VGTL.
Manipulation of the Market for Shares of VGTL
DURANTE also engaged in a scheme to control and manipulate the public stock of VGTL in order to artificially inflate the stock price and trading volume so as to profit from sales of VGTL stock and to further induce investments in private shares of VGTL. To that end, through entities he controlled, DURANTE held a majority of the publicly traded stock of VGTL. DURANTE recruited Cervino, a broker, to open brokerage accounts associated with DURANTE-controlled entities and investors who were clients of Werbel and Khan, many of whom did not know they had accounts with Cervino. Werbel and Khan, along with DURANTE, induced their clients to purchase VGTL stock through Cervino – sometimes without the clients’ knowledge or permission – while DURANTE and Cervino ensured that many of these purchases were matched with sales of VGTL stock by DURANTE-controlled accounts. The result of these transactions was that DURANTE and his co-conspirators were effectively taking both sides of a single transaction in VGTL stock in order to artificially control VGTL’s stock price. The defendants’ efforts to artificially inflate the market for VGTL increased the stock price from approximately $.25 per share in April 2012 to as much as $1.90, and dramatically inflated the trading volume, which increased the defendants’ abilities to raise private investments in VGTL. To compensate Cervino for his efforts to control and manipulate the market in VGTL, DURANTE made at least two cash payments to Cervino totaling $35,000. Moreover, DURANTE personally siphoned off more than $4 million in profits, which he concealed through the use of wire transfers among multiple accounts in the names of other individuals.
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DURANTE, 64, pled guilty to one count of conspiracy to commit securities fraud (Count One), one count of securities fraud (Count Two), one count of money laundering (Count Six), and one count of perjury (Count Nine). Count One and Nine each carry a maximum sentence of five years in prison. Counts Two and Six each carry a maximum sentence of 20 years in prison. The charges also carry a maximum fine of $5 million, or twice the gross gain or loss from the offense. The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge. DURANTE will be sentenced before U.S. District Judge Andrew L. Carter.
On January 4, 2016, Wise, 75, pled guilty before Judge Peck to one count of conspiracy to commit securities fraud, one count of securities fraud, one count of conspiracy to commit wire fraud, one count of wire fraud, one count of conspiracy to commit money laundering, and one count of money laundering. Count One carries a maximum sentence of five years in prison. Counts Two through Six each carry a maximum sentence of 20 years in prison. The charges also carry a maximum fine of $5 million, or twice the gross gain or loss from the offense.
On January 5, 2016, Reissman, 58, pled guilty before Judge Carter to one count of conspiracy to commit securities fraud, one count of securities fraud, one count of conspiracy to commit wire fraud, one count of wire fraud, and one count of making false statements to federal officers. Counts One and Five each carry a maximum sentence of five years in prison. Counts Two through Four each carry a maximum sentence of 20 years in prison. The charges also carry a maximum fine of $5 million, or twice the gross gain or loss from the offense.
Trial against defendants Christopher Cervino, Larry Werbel, and Sheik Khan is scheduled for February 27, 2017, before Judge Carter, on charges of conspiracy to commit securities fraud, securities fraud, conspiracy to commit wire fraud, and wire fraud. Defendants Werbel and Khan will also face trial on charges of investment adviser fraud. Defendants Werbel and Cervino will also face trial on charges of making false statements and perjury, respectively. The allegations contained in the Indictment as to those defendants are merely accusations, and they are presumed innocent unless and until proven guilty.
Mr. Bharara praised the work of the Federal Bureau of Investigation and the U.S. Postal Inspection Service, and thanked the Securities and Exchange Commission for its assistance. He added that the investigation is continuing.
The charges were brought in connection with the President’s Financial Fraud Enforcement Task Force. The task force was established to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. attorneys’ offices, and state and local partners, it is the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets; and conducting outreach to the public, victims, financial institutions and other organizations. Since fiscal year 2009, the Justice Department has filed over 18,000 financial fraud cases against more than 25,000 defendants. For more information on the task force, please visit www.StopFraud.gov.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Daniel S. Goldman and Andrea M. Griswold are in charge of the prosecution.
 As for the defendants who have not pled guilty (Christopher Cervino, Larry Werbel and Sheik Khan), the charges described herein constitute only allegations.