Two sentenced in securities fraud conspiracy
HOUSTON – Two defendants charged in relation to a more than $40 million securities fraud “pump and dump” conspiracy have now been ordered to prison, announced U.S. Attorney Ryan K. Patrick.
John David Brotherton, 60, League City, pleaded guilty Feb. 12, 2019, while Charles Earl Grob, 39, Houston, admitted his guilt Dec. 5, 2018.
Today, U.S. District Judge Vanessa Gilmore imposed a 60-month sentence for Brotherton, while Grob received a sentence of 12 months.
Brotherton and Grob were also ordered to forfeit $1.9 million and $242,907.09, respectively, and serve three years of supervised release following their sentences. The court also ordered each man to pay restitution to the victims of the fraud. The amount will be determined at a later date.
Brotherton and Grob admitted they participated in a conspiracy to commit fraud in microcap securities. During the course of the conspiracy, they obtained control of the stock of numerous companies, then “pumped up” the price of the stock through false and misleading press releases and fraudulent trading techniques. They then “dumped” their shares of stock onto the market for a significant profit.
Brotherton, who is in now in custody following violations of his conditions of release, will remain there pending transfer to a U.S. Bureau of Prisons facility to be determined in the near future. Grob was permitted to remain on bond and voluntarily surrender at a later date.
Five others - Andrew Ian Farmer, 41, Thomas Galen Massey, 49, Eddie Douglas Austin Jr., 69, and Carolyn Price Austin 65, all of Houston; and Scott Russell Sieck, 61, of Winter Park, Florida, also pleaded guilty for their respective roles and will be sentenced later this year.
The FBI conducted the investigation with the assistance of the Securities and Exchange Commission and Financial Industry Regulatory Authority. Assistant U.S. Attorneys Justin R. Martin and Michael Chu are prosecuting the case.