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Eight Charged by N.Y. in $290 Million Pump-and-Dump Plot


By Chris Dolmetsch September 11, 2014
Bloomberg News
http://www.businessweek.com/news/2014-09-11/eight-charged-by-n-dot-y-dot-in-290-million-pump-and-dump-plot

Eight people were indicted on charges of defrauding thousands of investors in penny stocks through a $290 million “pump-and-dump” scheme, Manhattan District Attorney Cyrus Vance Jr. said.

Three stock promoters -- Anthony Thompson, 38, of Bethesda, Maryland; Eric Van Nguyen, 30, of Quebec; and Jay Fung, 40, of Delray Beach, Florida -- are accused of working with five others from April 2009 to May 2012 to drive up prices of penny stocks to induce investors to buy shares, Vance said today in a statement.

The eight used “their positions as stock promoters and company insiders to inflate their own profits through fraud and deceit,” he said in announcing an 85-count fraud and grand larceny indictment.

Dumped Shares

The defendants issued press releases touting companies including HydroGenetics Inc. (HYGN:US), Xynergy Holdings Inc. (XYNH:US), Blast Applications Inc. (BLAP:US), Blue Gem Enterprise Inc. (BGEM:US), Mass Hysteria Entertainment Co. (MHYS:US), Lyric Jeans Inc. (LYJN:US), Smart Holdings Inc. (SMHS:US) and Sunpeaks Ventures Inc., according to prosecutors. They allegedly sold shares as prices rose.

Thompson, Fung, Schmeider and Oxsalida pleaded not guilty today during arraignments before New York State Supreme Court Justice Roger Hayes in Manhattan.

When the U.S. Securities and Exchange Commission began probing several of the companies in 2010, the promoters sought to conceal their ownership by having shares issued in the name of foreign corporations.

The others charged are Hanna Schmieder, 39, of Los Angeles, president of Lyric Jeans; Kenneth Oxsalida, 59, of Sebring, Florida, president of Smart Holdings; Joseph Dervali, 54, of Pembroke Pines, Florida; Luz Rodriguez, 47, of Miramar, Florida; and Christopher Balseiro, 31, of North Bay Village, Florida, prosecutors said.

Thompson, Fung, Schmeider and Oxsalida pleaded not guilty today during arraignments before New York State Supreme Court Justice Roger Hayes in Manhattan.

Sepe and 10 alleged cohorts -- including Thompson, Fung and Rodriguez -- were sued by the U.S. Securities and Exchange Commission in May 2012 in federal court in Miami and accused of operating two separate schemes to illegally sell stock in two small-cap companies, HydroGenetics and Recycle Tech.
Sepe Settlement

Sepe agreed to settle the SEC’s claims without admitting or denying the allegations, and agreed to pay disgorgement of $1.42 million and a lifetime ban on participating in an offer or sale of penny stocks, according to an SEC statement. Sepe couldn’t be immediately reached for comment today.

Thompson and Fung in February 2014 also agreed to settle with the SEC without admitting or denying the allegations and repay more than than $800,000 in alleged profits, as well as accept a lifetime ban on participating in an offer or sale of penny stocks, according to court filings.

Rodriguez failed to respond to the SEC’s complaint and in September 2012 was also banned from offering or selling penny stocks and ordered to pay $380,580, according to court filings.

Many of the eight people whose indictment was announced today had never met each other and their only connection is that they had all worked with Sepe, Fritz said.

“It’s a ring without the ringleader,” Fritz said.

To contact the reporter on this story: Chris Dolmetsch in New York State Supreme Court in Manhattan at

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To contact the editors responsible for this story: Michael Hytha at [e-mail] Andrew Dunn

http://www.businessweek.com/news/2014-09-11/eight-charged-by-n-dot-y-dot-in-290-million-pump-and-dump-plot