Two Sentenced to Prison for Stock Manipulation Scheme
Scheme Resulted in more than $2 Million in Fraudulent Profits
Two men who manipulated penny stocks, and then laundered the proceeds by purchasing precious metals, were sentenced to prison today in U.S. District Court in Tacoma, announced U.S. Attorney Annette L. Hayes. ALEXANDER HAWATMEH, 25, of Salem, Oregon was sentenced to five years in prison for securities fraud in a scheme that netted him more than $1.7 million. CHRISTOPHER MROWCA, 25, was sentenced to three years in prison for conspiracy to commit securities fraud. At HAWATMEH’s sentencing hearing U.S. District Judge Ronald B. Leighton said, “This sentence is driven by the corrosive effect that these actions have done to our financial institutions.”
“The stock manipulation in this case adversely impacted individual victims, and undermined the integrity of the financial markets,” said U.S. Attorney Annette L. Hayes. “An even playing field is essential to the ongoing viability and success of American financial markets. This blatant criminal activity undercuts trust in those markets by promoting a sense that the system is rigged against honest investors.”
According to records filed in the case, between December 2011 and April 2012, CHRISTOPHER MROWCA, ALEXANDER HAWATMEH and other co-conspirators engaged in a scheme to make it appear that a particular penny stock was being actively traded. During this period, the men accounted for 85% of the trades in ISM International, Inc. (ticker symbol “ISML”), a company 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 ISML penny stock had little value and no business that would generate real 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 via promotional websites and email addresses under their control with the intent of increasing demand for the ISML 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. MROWCA and 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 the purchase of gold and silver bars.
HAWATMEH admits manipulating three other penny stocks for significant profit. He and a co-conspirator manipulated Allied Products Corporation (ticker symbol “ADPC”), resulting in more than $94,000 in profits which he shared with Tovy Pustovit, a defendant in a related case; HAWATMEH made $425,141 in profits manipulating trading in Aden Solutions, Inc. (ticker symbol “ADSU”), and he made $1,272,281 in profits trading Riverdale Oil & Gas, Inc. (ticker symbol “RVDO”).
MROWCA has agreed to forfeit $244,000 in profits from the ISML stock manipulation. HAWATMEH has forfeited approximately $700,000 in assets and will be responsible for a money judgment of about $1 million with credit for amounts already paid to the Securities and Exchange Commission (SEC).
Pustovit pleaded guilty last month and is scheduled to be sentenced September 14, 2014. A fourth defendant charged in the scheme, Mikhail Galas, 25, is scheduled to be sentenced June 26, 2015.
The case is being investigated by the FBI. The Securities and Exchange Commission (SEC) is conducting a parallel civil investigation. The case is being prosecuted by Assistant United States Attorneys Justin Arnold and Katheryn Kim Frierson.