The recent college graduates will have to pay back approximately $230,000 plus interest.
By Jack Karp
Email this story
Three men arrested for running an Internet stock swindle will have to pay restitution, and two of them will serve prison time, according to the Securities and Exchange Commission (SEC).
The SEC first filed its complaint against 23-year-old Hootan Melamed, 26-year-old Allen Derzakharian, and 23-year-old Arash Aziz-Golshani on December 15, 1999.
The complaint alleged that the three men bought large amounts of stock in NEI Webworld for several cents per share and then artificially inflated the stock's value by posting false statements about the company on Internet message boards. After posting the statements, which claimed the company would soon be bought by LGC Wireless, the men sold their stock for a profit of approximately $364,000.
NEI Webworld, a Dallas, Texas-based commercial printing company, had already filed for bankruptcy at the time and owned no assets.
Melamed and Derzakharian agreed to settle the case with the SEC on January 22 and will have to return a combined $211,250, plus interest. Meanwhile, Melamed and Aziz-Golshani also settled with California's US attorney's office, which was prosecuting the pair.
Melamed pled guilty to one count of conspiracy to commit securities fraud and was sentenced to 10 months in prison. Aziz-Golshani, who pled guilty to one count of securities fraud and one count of conspiracy to commit securities fraud, was sentenced to 15 months in prison.
Meanwhile, a fourth defendant, Arash Molayem, was ordered to pay $16,006 in penalties but will not be prosecuted due to his cooperation with the SEC.
I don't want to mention that stock name.
The Department of Justice said a Delray Beach attorney has pleaded guilty to conspiracy and securities fraud related to an anthrax-related "pump and dump" scheme.
Assistant Attorney General Christopher A. Wray of the criminal division said Lewis Van Stillman pleaded guilty to one count of conspiracy and one count of securities fraud Thursday at U.S. District Court in the District of Columbia.
A federal grand jury had indicted Stillman and several co-defendants on charges related to a securities fraud scheme involving a company called 2DoTrade (Pink Sheets: TDOT). Stillman faces a maximum penalty of 15 years in prison and a $1 million fine at sentencing, on a date to be determined later, the department said.
The indictment, unsealed Sept. 30, alleged the defendants fraudulently pumped up the price and volume of 2DoTrade stock via "aggressive and misleading promotional campaigns," including issuing several press releases and disseminating millions of unsolicited e-mails and faxes that falsely claimed the company had contracts for goods and commodities worth more than $300 million.
In reality, the department said, the contracts were bogus.
Later, in a renewed effort to fraudulently raise the company's flagging stock price, the department alleged, the conspirators exploited publicity generated by the October 2001 anthrax attacks by fraudulently claiming 2DoTrade had an anti-anthrax product.
A Nevada corporation, the department said 2DoTrade was purportedly headquartered in British Columbia, Canada, and London, England. The company's common stock, registered with the U.S. Securities and Exchange Commission, at the time traded on the Over the Counter Bulletin Board.
In his plea agreement, the department said Stillman admitted serving as the legal counsel who facilitated the process of taking 2DoTrade public through a reverse merger with a shell company.
Stillman also admitted to conspiring to fraudulently promote and manipulate 2DoTrade stock for personal benefit, the department said. It also said he admitted to implementing a "lock-up" agreement that fraudulently restricted the public supply of 2DoTrade stock to control and manipulate its price and volume.
The department said Stillman also admitted he made false statements and material omissions in SEC filings for 2DoTrade that furthered the purpose of the conspiracy and the scheme to defraud.
Department of Justice trial attorneys Raja Chatterjee and Dorothy McCuaig are prosecuting the case.
Down down down!!!