Federal Jury Convicts Defendants In NuTech Energy Resources Securities Fraud
On Wednesday, October 13, 2021, a federal jury in Cheyenne returned guilty verdicts against a Pennsylvania man and two Florida men related to a stock fraud involving NuTech Energy Resources Inc., a company that claimed to operate coalbed-methane wells in Wyoming.
Justin Herman, 50, of Canonsburg, Pennsylvania, and Charles “Chuck” Winters Jr., 61, of Bradenton, Florida, were convicted of fraud and identity theft crimes.
Attorney Ian Horn, 67, of Brandon, Florida, was acquitted of the charged fraud crimes but convicted of making a false statement to the grand jury.
According to court documents and evidence presented at trial, Herman and Winters conspired with Robert “Bob” Mitchell, who pleaded guilty earlier this year, to pump and dump NuTech stock.
In this case, the conspirators bought control of a publicly-traded shell company called EcoEmissions Solutions Inc. and changed the company’s name to NuTech Energy Resources, whose stock was sold under the ticker symbol NERG. The conspirators released information online to create a false image for NuTech as a company located in Gillette operating gas wells in Wyoming using patented technology. In reality, NuTech had no business, no revenue, and no paid employees in Wyoming or elsewhere.
As part of the conspiracy, Herman and Winters used altered, backdated, and forged documents to acquire 13 billion free-trading shares of NuTech common stock. The conspirators then artificially inflated the market price of NuTech common stock by manipulative trading and by releasing to the public false and misleading information about NuTech’s business prospects. When the market price increased based on this false information, the conspirators turned around and sold their worthless NuTech shares to unwitting investors in the public market, including investors in Wyoming and around the world.
Ian Horn is a Florida-licensed attorney. As part of the investigation, Horn was subpoenaed to testify before the grand jury in January 2019 because his name appeared on documents related to NuTech and because the money used by Mitchell and Herman to buy control of EcoEmissions was transferred through Horn’s bank accounts. The jury found that Horn lied during his grand jury testimony about NuTech-related email communications that he falsely claimed he had lost and could not access even though he still had access to his email and was forwarding relevant email messages to Herman in December 2018.
Herman and Winters were each found guilty of conspiracy to commit securities fraud, securities fraud, conspiracy to commit wire fraud, and multiple counts of aggravated identity theft. Herman (a former FINRA registered broker) faces a mandatory two-year prison sentence and could be sentenced to a maximum of 53 years in prison. Winters also faces a mandatory two-year prison sentence and could be sentenced to a maximum of 49 years in prison. Horn was found guilty of making a false statement to the grand jury and could be sentenced to a maximum of 5 years in prison. The defendants are scheduled to be sentenced by the Honorable Alan B. Johnson, United States District Court Judge, in Cheyenne on January 5, 2022.
Bob Mitchell, who was barred by the SEC from participating in penny-stock offerings in 1999, is scheduled to be sentenced by Judge Johnson on October 15, 2021. Mitchell could be sentenced to a maximum of 25 years in prison.
Details about the scheme
According to details from the Indictment and public filings, the scheme worked as follows:
- In January of 2015, the defendants, Mitchell and Herman, took control of EcoEmissions Solutions Inc through an agreement that included the purchase of convertible notes. $80,000 wired from Mithcell to Horn on December 23, 2014, was used to cover the purchase of the notes. At the time, EcoEmissions was a publicly traded company using the trading symbol ECMZ.
- On January 2, 2015, Mitchell and Herman directed a name change of EcoEmissions to NuTech Energy Recources Inc, a symbol change to NERG, and the authorization of 60 billion shares. The amendment was filed with the Delaware Secretary of State on March 23, 2015.
- On March 24, 2015, Winters created a login account with OTC Markets Group, allowing Winters to post information related to NuTech online at www.otcmarkets.com.
- On or before May 19, 2015, Herman and Horn created an attorney letter with respect to current information for NuTech as if the letter was written by Horn and contained his legal opinions. In fact, the letter was written in significant part by Herman and contained false and misleading information. Horn did not review the information in the letter before signing and issuing it on his letterhead.
- On May 19, 2015, Winters used his login to post the attorney letter at www.otcmarkets.com.
- On July 10, 2015, Herman emailed documents to Pacific Stock Transfer Company to support the issuance of free-trading shares of NuTech. These documents included altered debt-assignment agreements that were backdated to December 2013 and January 2014 instead of December 2014 and January 2015 (the dates the acquisitions actually took place), altered wire transfer receipts that read $280,000 instead of $80,000, and a notice of conversion bearing the apparent signature of the NuTech CEO, Kevin Trizna.
- On or before September 16, 2015, and again on September 23, 2015, Herman and Horn created attorney opinion letters related to the issuance of free trading shares of NuTech as if the letters had been written by Horn and contained his legal opinions. In fact, each of the letters was written in significant part by Herman and contained false and misleading information. Horn did not review the information in the letters before signing and issuing each letter on his letterhead.
- On September 28, 2015, relying on the information provided, Pacific Stock Transfer Company issued 13 billion free trading shares of NuTech to a number of individuals and entities, including individuals and entities related to Mitchell, Herman, and Winters.
- Between November 3, 2015, and May 19, 2016, Herman, Mitchell, and Winters sold significant portions of those shares into the market while causing false and misleading disclosure statements to be uploaded to www.otcmarkets.com and flooding the market with false and misleading information through press releases, investor presentations, and stock promotions, including inventing a fake buyout agreement with a Russian company and fake operations in Wyoming that didn’t actually exist.
The SEC suspended trading of NuTech stock on May 20, 2016, putting an end to the scheme.
For further information about this securities law blog post, please contact Brenda Hamilton, Securities Attorney at 200 E. Palmetto Park Rd, Suite 103, Boca Raton, Florida, (561) 416-8956, by email [email protected] or visit www.securitieslawyer101.com. This securities law blog post is provided as a general informational service to clients and friends of Hamilton & Associates Law Group and should not be construed as and does not constitute legal advice on any specific matter, nor does this message create an attorney-client relationship. Please note that the prior results discussed herein do not guarantee similar outcomes.