FOUR CANADIANS & FIVE AMERICANS WERE INDICTED BY THE UNITED STATES OF AMERICA IN LARGEST PENNY STOCK FRAUD IN HISTORY

FOUR CANADIANS & FIVE AMERICANS WERE INDICTED BY THE UNITED STATES OF AMERICA IN LARGEST PENNY STOCK FRAUD IN HISTORY

PAOLA LORIGGIO, ADRIAN HUMPHREYS, 13/08/13, National Post

Former Toronto resident Sandy Winick figured he was on to a good thing with his scam raking in millions of dollars from investors, U.S. authorities allege, telling a colleague his scheme was better than another: “That deal is obviously a pump-and-dump. We know enough to be subtle.”

His business partner, Kolt Curry, another Canadian, allegedly boasted: “The money is good, it’s easy. It’s easy money. Definitely easy money, and it’s good money.”

And for awhile, they were right.

On Tuesday, however, they were two of four Canadians indicted in the United States, alongside five Americans, charged with running the largest international penny stock and advance fee frauds in history.

Mr. Winick, 55, was named as the mastermind behind the two related schemes that U.S. prosecutors allege bilked victims in 35 countries out of more than $140-million.

Despite being named as the kingpin, Mr. Winick was not among those taken into custody. He is considered a fugitive and believed to be in Bangkok, Thailand, where he has been living after stints in China, Vietnam, and the United States.

Also missing when U.S. authorities moved against the men was Gregory Curry, 63, another Canadian also believed to be in Thailand. Gregory and Kolt Curry are father and son.

Shortly before 9 a.m. Tuesday, Canadians Kolt Curry, 38, was arrested by the FBI in Garden City, New York, and Gregory Ellis, 46, was arrested in Toronto on behalf of U.S. authorities. Mr. Ellis was expected to have been in New York at the time of the arrests but now faces a U.S. extradition request.

“Where others saw citizens of the world, the defendants saw a pool of potential marks,” said Loretta Lynch, United States Attorney for the Eastern District of New York, when announcing the arrests.

“They cheated, lied and swindled investors into buying billions of shares of worthless stock, then turned around and used a second scam to cheat those investors again. But today, the defendants were the marks, and it was law enforcement that ran the table.”

"They cheated, lied and swindled investors into buying billions of shares of worthless stock, then turned around and used a second scam to cheat those investors again. But today, the defendants were the marks, and it was law enforcement that ran the table."

According to prosecutors, Mr. Winick concocted schemes to hit a wide pool of victims — and then to hit them again by taking more money with promises of reimbursing their initial losses.

First came a pump-and-dump.

The men are accused of taking control of huge quantities of worthless stock in 11 publicly traded companies.

The companies had little or nothing of value but their investment potential was “pumped up” through illegal sales campaigns: false press releases, announcements of non-existent business ventures and mergers, bogus statements circulated in social media and stock promoters and brokers bribed to talk up the stocks, authorities allege.

Once the stock price was artificially inflated, the accused traded billions of shares that they owned or controlled, duping unsuspecting investors to buy them before they were found to be worthless. The scheme generated more than $120-million, authorities say.

The accused men used throw-away cell phones in a bid to avoid detection, although agents with the Federal Bureau of Investigation intercepted some of their calls, according to documents filed in court.

Orchestrated by Mr. Winick, the pump-and-dump was carried out by the five American defendants. The second phase of the fraud was the domain of the four Canadians, prosecutors allege.

The Canadians set up so-called boiler rooms, which are high-pressure call centres, in at least four countries, including Canada.

They contacted the pump-and-dump victims and talked them into turning over more money in a bid to recover some of the money they had lost. Some were told they had to pay money to remove restrictions placed on the sale of their stock; others were coaxed into paying money for a lawsuit to recover losses.

Another $20-million was swindled in the follow-up fraud, authorities say.

The men were in the midst of setting up another call centre in Brooklyn to target more American investors, authorities allege.

In an intercepted phone call during the investigation, prosecutors allege that Kolt Curry enthused: “I tell you what man… hitting the Americans would be like taking money from a baby.”

He then boasted: “I had a guy send me a million dollars over one phone call… I guess in the industry they coin it as a smash and grab.”

The global nature of the scheme was met by an international law enforcement effort to topple it, Ms. Lynch said.

U.S. authorities worked with the Royal Canadian Mounted Police and Toronto police as well agencies in Britain, Thailand and China.

“The criminals behind this scheme were shameless in heartlessly defrauding hundreds of victims out of their savings and retirement accounts for their own enrichment,” said James Spero, a spokesman for Immigration and Customs Enforcement Homeland Security Investigations.

"The criminals behind this scheme were shameless in heartlessly defrauding hundreds of victims out of their savings and retirement accounts for their own enrichment."

The men face charges of securities fraud, wire fraud, conspiracy and false personation of a U.S. officer, and face more than 20 years in prison if convicted.

Three of the Canadians, Mr. Winick and Gregory and Kolt Curry, have run into investment regulation problems in the past. The trio has a hearing scheduled for next month before the Ontario Securities Commission.

They are accused in Ontario of misrepresentation to investors, illegal distribution and the unregistered trading of securities.

Mr. Winick also faced securities reprimands in China and Vietnam but remains undaunted, prosecutors said.

In a 2012 intercepted telephone call, he said he could keep operating under false names and shell corporations regardless of regulatory bans. And just two months ago, he bragged of bribing Thai officials to release him from jail when he was last arrested, prosecutors allege.

National Post