Swiss Asset Management Firm And Its Owner Charged In Manhattan Federal Court For Orchestrating Stock Manipulation Scheme
Danish National Who Participated in the Scheme Is Also Charged
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and William F. Sweeney Jr., the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced today the unsealing of an indictment charging BLACKLIGHT, S.A., a Swiss entity purporting to offer asset management and trustee services, and its founder and principal owner, KENNETH CIAPALA, as well as ULRIK DEBO, a/k/a “Molgaard Debo,” a/k/a “Ulrik Molgaard,” with engaging in a long-running stock manipulation scheme involving numerous United States issuers. CIAPALA and DEBO were arrested in the United Kingdom, and the United States Government will be seeking their extradition to the United States.
U.S. Attorney Geoffrey S. Berman said: “As alleged, for years the Swiss firm Blacklight, S.A., its owner, Kenneth Ciapala, and Ulrik Debo have made millions of dollars by orchestrating stock manipulation schemes of publicly traded shares of U.S.-based issuers. Today’s charges make clear that our Office, along with our law enforcement partners, will vigorously prosecute those who allegedly manipulate the stocks of U.S. issuers, including those operating abroad.”
FBI Assistant Director William F. Sweeney Jr. said: “As a major facilitator of market manipulation schemes, Blacklight, S.A, allegedly enabled numerous ‘pump and dumps’ over the course of six years. Disrupting the orchestrators of illegal financial activity is a top priority for the FBI’s securities fraud team, and we consider today’s indictment of Blacklight, its founder and principal owner Kenneth Ciapala, and co-conspirator Ulrik Debo an important step in that mission.”
As alleged in the Indictment unsealed in Manhattan federal court:
BLACKLIGHT, S.A. (“BLACKLIGHT”), a Swiss entity based in Geneva, Switzerland, that purported to offer asset management and trustee services to its clients, and a founder and co-principal of BLACKLIGHT, KENNETH CIAPALA, executed a wide-ranging stock manipulation scheme that spanned from in or about 2013 through December 2019 in which they manipulated the share price and trading volume of the publicly traded shares of multiple companies, and laundered the proceeds generated by the scheme. CIAPALA, utilizing BLACKLIGHT, set up various nominee entities to help scheme participants conceal their ownership of public company shares and evade SEC reporting requirements. BLACKLIGHT opened bank accounts and brokerage accounts on behalf of these nominee entities and executed trades in accounts held by these nominee entities in furtherance of the stock manipulation scheme.
ULRIK DEBO, a Danish citizen who resided in Europe, furthered the stock manipulation scheme by, among other things, identifying suitable publicly traded shell companies that could be used in the scheme; identifying, in certain instances, suitable privately held companies to engage in “reverse merger” transactions with the shell companies; obtaining financing to purchase all or substantially all of the outstanding shares of the issuers; causing various nominee entities to obtain ownership of the issuer’s shares; identifying and paying “promoters” that issued exaggerated and, at times, false press releases about the issuers in order to raise the trading price and volume of the issuer’s shares; and identifying and paying various “trading specialists” who assisted in artificially manipulating the trading volume and price of the issuer’s shares.
Overview of the Stock Manipulation Scheme
As alleged, from at least 2013 through December 2019, CIAPALA and his firm, BLACKLIGHT, as well as others, conspired to defraud the investing public by orchestrating and facilitating the manipulation of multiple publicly traded stocks, commonly referred to as “pump and dump” schemes. The vast majority of the stocks that CIAPALA, BLACKLIGHT, DEBO, and their co-conspirators sought to manipulate were “penny” or “microcap” stocks that traded in the United States on the over-the-counter (“OTC”) market. In executing these pump and dump schemes, CIAPALA, BLACKLIGHT, DEBO, and their co-conspirators (i) secretly amassed beneficial ownership of all, or substantially all, of the stock of certain publicly traded companies; (ii) began manipulating the price and demand for these stocks through, among other means, the release of materially false information to the investing public and manipulative trading practices, thereby causing the share price of these stocks to become artificially inflated; and (iii) sold out of their secretly-amassed positions at artificially inflated values at the expense of the investing public.
CIAPALA, using his firm BLACKLIGHT, primarily furthered the stock manipulation scheme by helping other participants in the scheme to obscure their beneficial ownership and control of all or substantially all of the shares of companies whose securities they sought to manipulate. CIAPALA caused BLACKLIGHT to establish nominee entities that were registered in the names of various third parties to hold the shares that were, in reality, beneficially owned and controlled by the scheme participants. In order to obscure their ownership interests, CIAPALA, BLACKLIGHT, DEBO, and others typically caused these nominee entities’ holdings to be structured so as to ensure that no single nominee entity held more than five percent of the outstanding stock of any of the relevant companies.
CIAPALA also caused BLACKLIGHT to open bank accounts in the names of these nominee entities and to trade shares owned by these nominee entities through various brokerage accounts. Through BLACKLIGHT, CIAPALA exercised trading authority over these nominee entities’ shares, and CIAPALA directed brokers to execute trades on behalf of these nominee entities in furtherance of the stock manipulation scheme. After CIAPALA, BLACKLIGHT, DEBO, and others participating in the scheme had obtained control of all or substantially all of the shares of a company, the scheme participants manipulated the share price and trading volume of the stock of the company. This typically occurred through a promotional campaign and through certain manipulative trading practices.
With respect to the promotional campaign, CIAPALA, BLACKLIGHT, DEBO, and others participating in the scheme caused promotional materials to be distributed to the investing public that contained exaggerated and, at times, false claims about the company whose stock they sought to manipulate. The scheme participants concealed from the investing public that these promotional materials were financed and created at the direction of those who beneficially owned and controlled substantially all of the shares of the relevant company that was the subject of the promotion.
In addition, to drive investor demand and artificially inflate the share price, CIAPALA, BLACKLIGHT, DEBO, and other participants also engaged in manipulative trading activity in order to artificially increase the trading volume and share price of the issuers whose stock they sought to manipulate. This manipulative trading activity included “match” trades whereby the scheme participants caused multiple nominee entities they controlled to essentially trade with one another to create the false appearance of trading volume and demand for the stock.
Laundering of the Profits Generated by the Scheme
As a result of the stock manipulation scheme, the scheme’s participants reaped millions of dollars in illicit profits by selling the shares they beneficially owned and controlled into the market at artificially inflated prices. After these crime proceeds were generated, CIAPALA and BLACKLIGHT allegedly assisted other scheme participants in obtaining their share of the proceeds by sending these funds to them in a manner designed to conceal the source of these funds and the identity of the true recipients of the funds. With CIAPALA’s knowledge and at times at his direction, transfers of the proceeds of the stock manipulation scheme were executed in a manner intended to conceal the true source of the funds and the recipients of these funds by, for example, using fabricated invoices to justify wire transfers from accounts held in the names of nominee entities (controlled and operated by BLACKLIGHT) to other bank accounts controlled by the scheme participants.
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The Indictment charges CIAPALA, 38, who resides in Switzerland, and BLACKLIGHT with one count of conspiracy to commit securities fraud, which carries a maximum sentence of five years in prison; three counts of securities fraud, each of which carries a maximum sentence of 20 years in prison; one count of conspiracy to commit wire fraud, which carries a maximum sentence of 20 years in prison; wire fraud, which carries a maximum sentence of 20 years in prison; conspiracy to commit money laundering, which carries a maximum sentence of 20 years in prison; and money laundering, which carries a maximum sentence of 20 years in prison.
DEBO, 50, is charged with one count of conspiracy to commit securities fraud, which carries a maximum sentence of five years in prison; two counts of securities fraud, each of which carries a maximum sentence of 20 years in prison; one count of conspiracy to commit wire fraud, which carries a maximum sentence of 20 years in prison; and wire fraud, which carries a maximum sentence of 20 years in prison.
The statutory maximum sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by a judge.
Mr. Berman praised the investigative work of the FBI, and thanked authorities in the United Kingdom, the Justice Department’s Office of International Affairs of the Department’s Criminal Division, and the Securities and Exchange Commission, which initiated civil proceedings against CIAPALA, BLACKLIGHT, DEBO, and others, for their assistance.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force and Complex Frauds and Cybercrime Unit. Assistant United States Attorneys Noah Solowiejczyk and Vladislav Vainberg are in charge of the prosecution.
The allegations in the Indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
 As the introductory phrase signifies, the entirety of the text of the Indictment, and the description of the Indictment set forth herein, constitute only allegations, and every fact described should be treated as an allegation.