Recidivist securities violator Jonathan Curshen, 47, has been convicted by a Miami jury for his role in the pump-and-dump of CO2 Tech Ltd., a pink sheets company that touted a line of pollution control products. The verdict, delivered on Tuesday, Jan. 31, came after an 11-day trial during which prosecutors argued that Mr. Curshen helped dump $7-million worth of CO2 Tech shares while the company falsely claimed to have a business relationship with Boeing. (All figures are in U.S. dollars.) Also convicted on Tuesday was Nathan Montgomery, 30, a Las Vegas man who helped with wash trading in the scheme.
Witnesses at the trial included former Pacific International Securities Inc. broker David Ricci, who faced related charges but reached a deal in which he agreed to testify for the prosecution. According to prosecutors, Mr. Ricci worked for Mr. Curshen's company in Costa Rica, and helped him execute a series of wash trades that boosted CO2 Tech.
Mr. Curshen's conviction is the latest of three securities-related offences for which the Florida promoter has been found guilty. They include the 2000 pump-and-dump of Freedom Golf Inc., in which he and others dumped over $500,000 worth of stock after posting baseless revenue and profit predictions for the company on-line. The U.S. Securities and Exchange Commission won a $116,953 civil penalty against him for that promotion as well as a permanent penny stock ban. (The trial included testimony from former Union Securities Ltd. employees Trevor Koenig and Joe Fernando, who worked at the firm's White Rock branch.)
More recently, prosecutors in New York secured a 16-month sentence against Mr. Curshen for broker bribery. The government claimed that he tried to bribe corrupt brokers to buy shares of a Washington State company, Industrial Biotechnology Corp. It turned out the man purporting to represent the brokers was an undercover FBI agent. Mr. Curshen pleaded guilty to those charges in June, 2009, and received his sentence in October, 2011. He was transferred to a Florida jail ahead of the CO2 Tech trial to facilitate access to his lawyer.
While much of the present case against Mr. Curshen stemmed from the CO2 Tech promotion, prosecutors said that he could be responsible for many others. They claimed that he transferred $91.5-million from a bank account at HSBC Bank in Vancouver in 2006 and 2007, and that most of the money represented proceeds of pump-and-dumps.
The charges against Mr. Curshen were conspiracy to commit securities fraud, wire fraud and mail fraud; two counts of mail fraud; and conspiracy to commit international money laundering. He faces five years in jail on the conspiracy count, and up to 20 years on each count of mail fraud and money laundering. His sentencing is set for May 9, 2012.
CO2 Tech charges
The CO2 Tech charges are best detailed by a civil complaint that the SEC filed against Mr. Curshen and others on Feb. 18, 2011, in the Southern District of Florida. The complaint described Mr. Curshen as the founder of Red Sea Management Inc., a Costa Rican entity that specialized in helping those looking to run a pump-and-dump. According to the SEC, he founded Red Sea in 1998 and used it to launder millions of dollars in illegal trading proceeds for overseas clients. Its services include market manipulation, incorporating shell companies and establishing virtual offices. In October, 2006, it was operating 54 brokerage accounts in the United States and Canada in the names of 20 nominees.
The CO2 Tech promotion came about in January, 2007, when two Israeli men, Ariav Weinbaum and Yitzchak Zigdon, enlisted Red Sea to help promote the company, the complaint stated. (Mr. Weinbaum and Mr. Zigdon are defendants in both the SEC and criminal cases.) At the time the men held CO2 Tech's entire public float of 22.5 million shares through nominees and were looking to sell massive quantities of the stock.
The actual promotion began on Jan. 29, 2007, when CO2 issued a news release in which it claimed it had been working on pollution control systems for over a decade. The company also said it had an office in London and a manufacturing operation in Israel with 10 employees. In reality, the London office was just a mail drop, and Israeli authorities could not find the manufacturing operation, the complaint stated.
The next day, the company issued a news release in which it claimed that Boeing had taken an interest in one of its products. The product would help the aviation industry "reduce ecological contamination." According to the SEC, the release was completely false. The company had no communication with Boeing prior to issuing the news. The only thing it received from Boeing was a cease-and-desist letter which arrived one week after the news release.
As the news went out, Mr. Curshen and Mr. Ricci "jump-started" the stock with a series of matched orders, the complaint stated. With the assistance of Mr. Montgomery and two other promoters who were mostly on the buy side, the men boosted the stock from 91 cents to $1.65 on volume of 12.2 million shares. The SEC claimed they were able to dump $5.5-million worth of stock that day. In total, Red Sea obtained $7-million in profits for Mr. Weinbaum and Mr. Zigdon, which it wired to bank accounts in Israel and Switzerland.
The SEC sought disgorgement of ill-gotten gains, appropriate civil penalties and penny stock bans against the men. The other defendants in the complaint were New York lawyer Michael Krome, who wrote an opinion letter that made millions of CO2 Tech shares tradable; Florida stock promoter Robert Weidenbaum, who helped arrange spam touting the company; and Costa Rica resident Ronny Salazar, who helped Mr. Ricci with the trading. In filing the case, the SEC acknowledged the assistance of the B.C. Securities Commission, the Costa Rican Police, the Israel Securities Authority, the United Kingdom Financial Services Authority and the City of London Police.
Mr. Krome and Mr. Weidenbaum previously pleaded guilty in the criminal case, and await sentencing. Mr. Weinbaum and Mr. Zigdon also face criminal charges but have not yet made an appearance. Mr. Weinbaum has not been arrested, and Mr. Zigdon is in custody in Germany awaiting extradition. Both men have responded to the SEC case, in which they are also defendants, and generally deny any wrongdoing.
Mr. Ricci settled the SEC case by agreeing to a penny stock ban and to an order barring future violations. Although he did not admit to any wrongdoing, he did agree to plead guilty to the criminal charges. When he was in Vancouver, Mr. Ricci worked at PI for five years, leaving the firm on Nov. 17, 1999.
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