Securities Attorney and Five Others Indicted for Conspiracy, Wire Fraud, and Mail Fraud in Stock Manipulation Scheme

WASHINGTON—Six individuals, including a securities attorney, were charged in an indictment unsealed today with defrauding investors in a stock manipulation scheme from 2003 to 2008, announced Assistant Attorney General Lanny A. Breuer of the Criminal Division, Deputy Chief Inspector Daniel S. Cortez for the U.S. Postal Inspection Service (USPIS) and James W. McJunkin, Assistant Director in Charge of the FBI's Washington Field Office. In a related action, the U.S. Securities and Exchange Commission (SEC) filed a civil complaint in the Southern District of Florida, Miami division.

The defendants charged in the indictment returned in the Southern District of Florida are: Jonathan Randall Curshen, 46, of Sarasota, Florida; Michael Simon Krome, 49, a securities attorney from Long Island, New York.; Ronald Salazar Morales, aka "Ronny Salazar," 39, of Costa Rica; Robert Lloyd Weidenbaum, 44, of Miami; and Eric Ariav Weinbaum, 37, and Izhack Zigdon, 47, of Israel. Curshen was arrested this morning in Sarasota, Florida and made an initial appearance in U.S. District Court in Tampa, Florida. Krome was arrested in Long Island, New York and will make an initial appearance later today in U.S. District Court in Central Islip, New York. Weidenbaum was arrested today in Miami and is making his initial appearance in U.S. District Court in Miami at 2 p.m. EST. Zigdon was previously arrested in Germany in October 2010 and the United States is seeking his extradition.

"The indictment unsealed today alleges that the defendants used their access and training to illegally manipulate stock prices for their own advantage," said Assistant Attorney General Breuer. "Pump-and-dump schemes like the one alleged in this case leave legitimate investors holding worthless stocks. Anyone who defrauds the investing public in this way—whether you are a securities lawyer, a stock trader, or a simple fraudster—will be held to account."

According to the indictment, Curshen was the principal behind Red Sea Management and Sentry Global Securities, two companies located in San Jose, Costa Rica, that provided offshore accounts and facilitated trading in penny stocks. The indictment alleges that Weinbaum and Zigdon took control of the outstanding shares of a company called CO2 Tech (ticker CTTD), which traded in the over-the-counter market through listings on Pink Sheets, an inter-dealer electronic quotation and trading system. Weinbaum and Zigdon allegedly obtained the shares by retaining Krome who allegedly employed a method to evade federal securities registration requirements in order to provide co-conspirators with millions of unregistered and "free-trading" shares of CO2 Tech that the co-conspirators could not have otherwise legally obtained.

The indictment alleges that the shares were subsequently sold to the general investing public by Weinbaum, Zigdon, Curshen and Salazar, a Sentry Global stock trader, through Sentry Global's stock trading floor in Costa Rica. According to the indictment, the co-conspirators were able to hide from the investing public the actual financial condition and business operations of the company by evading the registration requirements. The indictment also alleges that Weidenbaum was paid approximately $1 million by Weinbaum and Zigdon to participate in sham stock trades of CO2 Tech to make it appear that there were genuine investors in the market that were buying the shares.

As alleged in the indictment, coordinated trades were often made between the co-conspirators in conjunction with the issuance of false and misleading press releases that were designed to make CO2 Tech appear that it had significant business prospects. According to these press releases, CO2 Tech purported to have a business relationship with Boeing to reduce polluting gases emitted from airplanes. The indictment alleges that these relationships never existed.

After fraudulently "pumping" the market price and demand for CO2 Tech stock through these press releases and coordinated trades, Weinbaum, Zigdon, Curshen, and Salazar allegedly "dumped" shares by selling them for large profits to the general investing public in the over-the-counter market through listings on Pink Sheets. These shares were allegedly purchased by unsuspecting investors, including in the Southern District of Florida, and were often rendered virtually worthless.

The defendants are charged with one count of conspiracy to commit securities, mail, and wire fraud. Additionally, Weinbaum and Zigdon are charged with three counts of wire fraud, Weidenbaum with two counts of wire fraud and Krome with one count of wire fraud; Curshen and Salazar are charged with two counts of mail fraud, Weinbaum and Weidenbaum with one count of mail fraud; and Krome is charged with one count of violating the securities registration laws and one count of obstruction of justice. The indictment also seeks forfeiture from the defendants.

The conspiracy charge carries a maximum penalty of five years in prison and a $250,000 fine. Each count of wire fraud and mail fraud carries a maximum penalty of 20 years in prison and a $250,000 fine. The securities registration violation carries a maximum penalty of five years in prison and a $10,000 fine, while the obstruction count carries a maximum penalty of 20 years in prison and a $250,000 fine.

In a related civil matter, the SEC charged Curshen, Krome, Salazar, Weinbaum, and Zigdon with violations of the Securities Act of 1933 and violations of the Securities Exchange Act of 1934. Weidenbaum is charged with aiding and abetting certain violations by Weinbaum and Zigdon.

An indictment is merely a charge and defendants are presumed innocent until proven guilty.

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 Criminal Division's Fraud Section. 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 SEC in its investigation. The Criminal Division's Office of International Affairs and Costa Rican authorities also provided assistance.

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.

This article was sponsored by Police Books.

Stock Fraud

Three Charged in Alleged Grifco International, Inc. Stock Fraud


March 12, 2010 - HOUSTON—Three men have been indicted for allegedly defrauding investors who purchased stock from 2004 until 2007 in a publicly-traded company called Grifco International Inc., United States Attorney José Angel Moreno and FBI Special Agent in Charge Richard Powers announced today.

Evan “Nick” Jarvis, 36, and Jim Dial, 53, both of Houston, and Alex Ellerman, 35, of Chicago, were charged with conspiracy and wire fraud in a eight-count indictment returned by a grand jury on Wednesday, March 3, 2010. Jarvis surrendered himself to federal authorities on Wednesday, March 10, 2010, and has been ordered release on a $100,000 bond. This morning, Dial surrendered himself to federal authorities. He appeared before a U.S. Magistrate Judge today and has also been ordered released on a $100,000 bond. The whereabouts of the third defendant, Ellerman, is presently unknown. A warrant remains outstanding for his arrest. Anyone having information regarding the whereabouts of Ellerman, a white male with blue eyes and brown hair standing 5’11” tall and weighing approximately 200 pounds, is asked to contact the FBI Houston office via telephone number (713) 693-5000 or via e-mail at Houston.texas@ic.fbi.gov or if outside the U.S., contact can be made with the nearest American Embassy or Consulate. Ellerman's photo is below.

The FBI’s two-year investigative effort with assistance from the U.S. Securities and Exchange Commission and the Harris County District Attorney’s Office led to the indictment which alleges that between 2004 and 2007 Jarvis, Dial, and Ellerman issued shares of Grifco stock (GFCI) to themselves, disseminated false and misleading information about the company in an effort to increase the price of the stock and then sold the overpriced stock to unsuspecting investors in the public market place. As a result of the fraud, the indictment alleges Jarvis received $2,096,239; Dial received $1,659,198 and Ellerman received $1,061,205.

All three defendants are charged with conspiracy and six counts of wire fraud. Ellerman is also accused of obstructing a United States Securities and Exchange Commission investigation of Grifco by deleting information from a computer that was subject to a subpoena on Aug. 12, 2008.

The conspiracy charge carries a maximum statutory penalty of five years' imprisonment, upon conviction. Each of the six wire fraud counts carries a maximum statutory penalty of 20 years' imprisonment. The obstruction of justice count also carries a maximum statutory penalty of 20 years' imprisonment.

Assistant U.S. Attorney John R. Lewis will be prosecuting the case.

This law enforcement action is part of President Barack Obama’s 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.