Three Charged in Connection with Stock Manipulation Scheme
Defendants Allegedly Made More Than $220,000 With “Pump And Dump” Penny Stock Manipulation Scheme
Three men who allegedly manipulated penny stocks, and then laundered the proceeds by purchasing precious metals, were charged today in U.S. District Court in Tacoma with conspiracy to commit securities fraud and conspiracy to launder monetary instruments, announced U.S. Attorney Jenny A. Durkan. MIKHAIL GALAS, 24, of Vancouver, Washington was arrested in Long Beach, California after he arrived on a flight from Portland, Oregon. He will make his initial appearance in U.S. District Court in Los Angeles. CHRISTOPHER MROWCA, 24, was arrested in Bradenton, Florida and will make his initial appearance in Tampa. ALEXANDER HAWATMEH, 23, of Salem, Oregon is incarcerated in Oregon on an unrelated charge and will appear in federal court at a later date. In addition to the arrests, searches were conducted in Vancouver, Washington, Bradenton, Florida, Salem, Oregon and Boulder, Colorado.
“Manipulative trading in penny stocks can lead to big profits for swindlers at the expense of small investors who buy the hype,” said U.S. Attorney Jenny A. Durkan. “The Securities and Exchange Commission is working closely with our office to hold these market manipulators accountable.”
In addition to the criminal complaint filed today, the Securities and Exchange Commission also filed a civil case against the men.
According to the criminal complaint, between December 2011 and April 2012, the men engaged in a scheme to make it appear that a particular penny stock was being actively traded. During that period the men accounted for 85% of the trades in the particular stock related to a purported flea market business in Florida. The conspirators allegedly engaged in “matched trades” where one sold shares and the other bought shares to make it appear investors were interested in the company. In fact the penny stock had little value and no business that would generate significant revenue or income. In addition to the trades to make it appear there was interest in the stock, the men sent fraudulent and misleading “blast” e-mails through promotional websites and email addresses under their control with the intent of increasing demand for the stock. The blast emails enticed other unknowing investors to buy the stock – then the men sold their shares, earning a profit of more than $223,000. CHRISTOPHER MROWCA and ALEXANDER HAWATMEH then engaged in a scheme to launder the proceeds of the illegal stock manipulation scheme by passing the money through third party accounts and ultimately purchasing gold and silver bars.
Conspiracy to commit securities fraud is punishable by up to five years in prison and a $250,000 fine. Conspiracy to launder monetary instruments is punishable by up to 20 years in prison.
The charges contained in the complaint are only allegations. A person is presumed innocent unless and until he or she is proven guilty beyond a reasonable doubt in a court of law.
The case is being investigated by the FBI. The case is being prosecuted by Assistant United States Attorneys Justin Arnold and Katheryn Kim Frierson.