On August 13, 2013, the U.S. Attorney’s Office for the Eastern District of New York announced the indictment of Sandy Winick, a Canadian promoter now living in Thailand; Gregory Curry, a Canadian living in Thailand; Kolt Curry, a Canadian living in Thailand and Canada; Gregory Ellis, a Canadian; Gary Kershner, a U.S. citizen living in Arizona and Kansas; Joseph Manfredonia, a U.S. citizen living in New Jersey; Curt Poyner of Florida; Songkram Roy Sahachaisere, a U.S. citizen living in Los Angeles; and William Seals of California for their roles in a massive penny stock fraud.
Winick, Kolt Curry, and Manfredonia used aliases as well as their real names.
The defendants stand accused of manipulating the price of penny stocks, using an advance fee scheme to bilk investors who’d already purchased restricted stock in those companies. According to charges, the defendants were so brazen that they impersonated Internal Revenue Service employees and expolited U.S. investors. One Canadian defendant, Kolt Curry, stated (on a recorded conversation) that, “hitting the Americans would be like taking money from a baby.” The defendants are alleged to have reaped at least $140 million from the fraud between 2008 and 2013.
The Reverse Merger Pump and Dump Scheme
First, the defendants gained controlling interests, in the form of huge quantities of stock,in 11 public shells. Winick was already involved with several of them, as they’d been among the 30 companies created by him in 2002 as spinoffs of his notorious Adatom.com.
Then, in the proud pump and dump tradition, they issued a stream of fraudulent press releases, hired promoters to tout the stocks, bribed brokers, engaged in wash trading and matched trades, and paid kickbacks to willing collaborators. In addition to the general market manipulation, their boiler room sold shares and warrants to individuals all over the world in stock purchase agreements.
The stocks pumped were Mass Petroleum Inc. (MAST) of Vancouver; Blackout Media Corp. (BKMP) of Ontario; Resource Group International Inc. (RSGR) of Arizona; Liquid Gold International Corp. (FOYJ, after it was acquired by another company) of Indiana; iMusic Worldwide Inc. (IMWL) of Washington State; WGI Holdings Inc. (WGIH) of Delaware; Talisman holdings Inc. (TMHO) of Colorado; Nikron Technologies Inc. (NKRN) of Kansas; Tal-Cap Inc. (TALC) of Minnesota; RainEarth Inc. (RNER) of Beijing; and Sync2 Networks Corp. (SYNW) of Nevada.
The Advance Fee Scam
Everyone is familiar with “Nigerian letters,” but Winick and his associates carried the concept of the advance fee scam one step further. First the boiler rooms sold stock to their victims, and then told some of those victims that if they wanted to convert their warrants to free trading stock, they’d have to obtain legal opinion letters. Others were told they needed to pay an “advance tax” to the IRS; the scammers used what looked like IRS stationery, and pretended to be IRS employees. Later on, as the stocks’ price declined, the boiler rooms contacted victims to suggest that they join a pending or anticipated class action against the companies they’d invested in; naturally that also entailed the payment of a fee.
Many victims cooperated, paying a total of $20 million. The money ended up in a bank account in Beirut, Lebanon. Subsequent plans were to open a new boiler room in Brooklyn. Kolt Curry commented, “I tell you what man… hitting the Americans would be like taking money from a baby.”
No opinion letters were written, no stock was freed up, the IRS received no “advance taxes,” and no class actions were brought.
The perpetrators evidently believed they could avoid detection by using throwaway cell phones, but their faith was misplaced. Their calls were monitored for a considerable length of time. In December 2012, Winick joked about how he could continue operating under false names and shell corporations even if he were banned for life by the SEC; more recently, he bragged that he’d bribed Thai officials to get out of jail the last time he was arrested there.
U.S. Attorney Loretta Lynch said: “As alleged in the indictment, the defendants used our securities markets as a platform from which to run elaborate fraudulent schemes to victimize unsuspecting investors across the globe. Where others saw citizens of the world, the defendants saw a pool of potential marks. 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.”
Winick has already been sanctioned by the Securities and Exchange Commission (SEC), and has been sanctioned by regulatory agencies in Canada, Vietnam and China. Sahachaisere has also been sanctioned by the SEC. Manfredonia was prosecuted in Nevada for conspiracy to commit bank fraud, mail fraud, and wire fraud; he was sentenced to five years’ probation. Gary Kershner, a disbarred securities lawyer, was previously convicted of two felonies related to his role in a securities offering. Kolt Curry, controlled the transfer agency used by several of the companies involved in the scheme.
Clearly the actions taken were ineffective deterrents.
Seven of the defendants have already been arrested; Winick and Gregory Curry remain at large. The operation isn’t yet over. FBI Assistant Director-in-Charge George Venizelos stated, “While the charges announced today are significant, they are but one example of what’s left to come as we continue to work with our partners in this ongoing investigation.”
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