Two Stock Promoters, a Stock Trader and a Securities Lawyer Sentenced to Prison for Their Roles in a $7 Million Fraudulent Stock Manipulation Scheme
Two stock promoters, a securities lawyer and a stock trader associated with a Costa Rican brokerage firm were sentenced today in the Southern District of Florida for their participation in a stock manipulation scheme that defrauded investors in a company called CO2 Technologies, announced U.S. Attorney Wifredo A. Ferrer of the Southern District of Florida, Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division, Chief Postal Inspector Guy Cottrell of the U.S. Postal Inspection Service (USPIS) and James W. McJunkin, Assistant Director in Charge of the FBI’s Washington Field Office.
U.S. District Judge Richard W. Goldberg in Miami sentenced Michael Krome, 50, a securities attorney from New York, to 34 months in prison. Stock promoters Timothy Barham Jr., 44, of Tennessee, and Robert Weidenbaum, 46, of Miami, were sentenced by Judge Goldberg to 30 months and 26 months in prison, respectively. Krome, Barham and Weidenbaum previously pleaded guilty to conspiring to commit securities fraud, mail fraud and wire fraud. Krome was ordered to forfeit $17,490; Barham was ordered to forfeit $250,000; and Weidenbaum was ordered to forfeit $360,000.
In a separate but related case, former stock trader David Ricci, 41, was sentenced by Judge Goldberg to 18 months in prison. Ricci previously pleaded guilty to one count of conspiring to commit securities fraud, wire fraud and mail fraud. Ricci had been employed as a stock trader at Sentry Global Securities, part of a company called Red Sea Management, an offshore brokerage firm that was based in San Jose, Costa Rica.
Two codefendants, Jonathan Randall Curshen, 47, the head of Red Sea Management and Sentry Global Securities, and Las Vegas stock promoter Nathan Montgomery, 31, were convicted of all counts after a two-week trial in January of this year. Curshen and Montgomery are scheduled to be sentenced by Judge Goldberg in Miami on May 11, 2012. Another codefendant, Ryan Reynolds, 40, of Dallas, awaits sentencing on his guilty plea to one count of conspiracy to commit securities fraud, wire fraud and mail fraud.
Weidenbaum and Barham admitted that they and others fraudulently “pumped” the market price and demand for CO2 Tech stock through false and misleading press releases. They also admitted to engaging in secret coordinated trades of shares of CO2 Tech stock in order to create the appearance of legitimate buying interest by legitimate investors. Ricci admitted that as the stock promoters pumped the price of the stock, Ricci and his conspirators facilitated the “dumping” of shares through the trading desk at Red Sea Management and Sentry Global Securities by selling the shares to the general investing public. Weidenbaum and Barham also admitted that they and other conspirators were paid approximately $1 million in cash to buy CO2 Tech stock in order to inflate its price. The cash was delivered to them in Miami via a private jet from an airport outside New York. The stock manipulation scheme generated approximately $7 million in illegal proceeds.
Krome admitted that he participated in the conspiracy by evading federal securities registration requirements to facilitate the issuance of millions of unregistered and “free trading” shares of CO2 Tech that were used to execute the stock manipulation. According to the indictment, the plan was orchestrated by two Israeli nationals, Eric “Ariav” Weinbaum and Izahack Zigdon, who are both fugitives. Also charged was Ronny Salazar Morales, another trader at Sentry Global Securities and Red Sea Management. Salazar is also a fugitive.
The case was investigated by the FBI’s Washington Field Office and the USPIS. The case is being prosecuted by Trial Attorneys N. Nathan Dimock and Rina Tucker Harris of the Fraud Section in the Justice Department’s Criminal Division. The U.S. Attorney’s Office for the Southern District of Florida provided significant assistance in this case. The Department of Justice acknowledges the significant assistance of the Financial Industry Regulatory Authority (FINRA) and the U.S. Securities and Exchange Commission (SEC) in its investigation. The criminal case originated as a referral from the SEC, which has a pending parallel civil case. The Criminal Division’s Office of International Affairs and Costa Rican authorities also provided valuable assistance.
The Department of Justice has established a website for potential victims of the crime, which may be accessed at www.justice.gov/criminal/vns/caseup/, under case numbers 11-cr-20121 and 12-cr-20049. Potential victims are urged to contact the Department of Justice as directed on the website.
This prosecution is part of efforts under way by the Financial Fraud Enforcement Task Force. President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.
A copy of this press release may be found on the website of the United States Attorney's Office for the Southern District of Florida at http://www.usdoj.gov/usao/fls. Related court documents and information may be found on the website of the District Court for the Southern District of Florida at http://www.flsd.uscourts.gov or on http://pacer.flsd.uscourts.gov.
