Former Awesome Penny Stock linked stock promoter Anthony J Thompson Jr sentenced to 1 year in prison
Former Awesome Penny Stock linked stock promoter Anthony J Thompson Jr sentenced to 1 year in prison
nodummyMarch 3, 2019Blog0 Comments
On January 4, 2019, Anthony J Thompson Jr (aka AJ Thompson) was sentenced to 1 year in prison for his role in what the DOJ described as a $290m pump and dump scheme involving more than 9 public Issuers between April 2009 and June 2012.
The 85 count Indictment filed in New York State Supreme Court charged Eric Van Nguyen, Jay Fung and AJ Thompson, with Criminal Possession of Stolen Property in the First and Second Degrees, Grand Larceny in the Second, Third, and Fourth Degrees, Scheme to Defraud in the First Degree, and Securities Fraud. Other Defandants in the Indictment included Anna Schmieder, Kenneth Oxsalida, Joseph Dervali, Luz Rodriguez, and Christopher Balseiro.
According to the Indictment the scheme involved at least 9 public Issuers including:
Hydrogentics Inc (HYGN)
Synergy Holdings (XYNH)
Blast Applications (BLAP)
Blue Gem Enterprise Inc (BGEM)
Mass Hysteria Entertainment Company Inc (MHYS)
Recycle Tech Inc (RCYT)
Lyric Jeans Inc (LYJN)
Smart Holdings Inc (SMHS)
Sunpeaks Ventures (SNPK)
How it all came together
By 2009, Eric Van Nguyen, a Canadian citizen, was running a stock promotion company named Xplosivestocks.com. Xplosivestocks.com had grown into a very successful stock promotion company drawing the attention of some big money players in the pump and dump stock promotion industry including David Levy and Donna Levy. David and Donna Levy played a big part in helping Eric Cusimano grow Best Damn Penny Stocks into a successful stock promotion company in 2008. Cusimano would later do a number of deals for Jim Can linked tickers.
Donna and David Levy who were career fraudsters ended up being Indicted by the DOJ of New York in December of 2011 for the CNWI and BANI pump and dumps. They were found guilty in March of 2013. David Levy was sentenced to 9 years in prison. Donna Levy was sentenced to 126 months in prison.
Eric Cusimano was arrested in Panama in June of 2014. The Indictment can be viewed here. He ended up being sentenced to 46 months in prison.
Donna and David Levy flew Eric fly down to Florida to meet and brought him in on the BANI stock promotion in 2009. BANI was Eric’s first big deal and he received a $250,000 cash payment to promote it from the Levys.
It was through Donna and David Levy that Eric Van Nguyen met Kevin Sepe.
Sepe got Eric Van Nguyen involved with Jay Fung and AJ Thompson setting up a stock promotion team to promote a bunch of Issues that Sepe largely controlled including HydroGenetics Inc. (HYGN), Xynergy Holdings Inc. (XYNH), Blast Applications Inc. (BLAP), Blue Gem Enterprise Inc. (BGEM), Mass Hysteria Entertainment Co. (MHYS), Lyric Jeans Inc. (LYJN), Smart Holdings Inc. (SMHS), and Recycle Tech Inc (RCYT).
Through a Nevada business entity named Golden Dragon Media Inc and another company named Canada Inc, Nguyen controlled several stock promotion domains including titanstox.com, goldendragonmedia.com, secretpennystocks.com, unrealstocks.com, monsterstox.com, and insanepicks.com.
Jay Fung controlled a business entity named Pudong LLC that distributed stock promotion newsletters through pennypic.com.
Anthony Thompson controlled a business entity named OTC Solutions LLC that controlled several stock promotion websites including explicitpennypicks.com, freeinvestmentreport.com, explicitpicks.com, premierpennystocks.com, freepennyalerts.com, oxofwallstreet.com.
Together Nguyen, Fung and Thompson combined their efforts to run stock promotions on the Kevin Sepe Issuers – HYGN, XYNH, BLAP, BGEM, MHYS, RCYT, LYJN, and SMHS.
On September 11, 2014, the DOJ of New York brought charges against the Nguyen, Fung, and Thompson for the $290 million pump and dump scheme.
A break down of the other Defendants involvement in the stocks includes:
Hanna Schmieder (LYJN and RYCT)
Kenneth Oxsalida (SMHS and BGEM)
Joseph Dervali (MHYS, LYJN, and BGEM)
Luz Rodriguez (HYGN and BGEM)
Christopher Balseiro (XYNH, RCYT, LYJN, and BGEM)
Not named in the Indictment was the mastermind of the scheme, Kevin Sepe.
According to court records, besides masterminding the stock promotion, Kevin Sepe controlled a vast portion of the shares dumped during the promotions. To conceal his ownership, his shares were placed in the names of multiple loyal nominees including Defendants Luz Rodriguez and Joseph Dervali who then sold their shares and split the profits with Kevin Sepe. In addition to concealing his ownership and control, having shares held by these nominees allowed Sepe to evade requirements that persons who held more than 5% of the shares of a company be disclosed.
Despite being the top dog in the scheme, Sepe would end up working with the prosecutors helping them build their cases against the other defendants.
The SEC had perviously brought charges against Kevin Sepe along with attorney Melissa Rice, attorney Ronny Halperin, Seth Eber, Howard Ettelman, and Charles Hansen III on May 2, 2012 for the HYGN pump and dump. On May 2, 2012, the SEC also brought charges against Sepe, Fung, and Thompson along with Ryan Gonzalez and attorney David Rees for the RCYT pump and dump.
In the SEC cases, Kevin Sepe settled. Without admitting or denying the allegations, Sepe agreed to the disgorgement of $1,416,466.16, prejudgment interest of $126,761.86, and penalties of $185,000 as well as a permanent penny stock bar.
Thompson settled the RCYT case on February 14, 2014 agreeing to disgorge $349,504,61 plus $23,735.15 as well as pay a $120,000 civil penalty and accept a permanent penny stock ban.
Awesome Penny Stocks
Eric Van Nguyen was never arrested in the criminal case. He still remains at large as of today.
David and Donna Levy were not the only ones that drew the attention of Eric Van Nguyen and his Xplosivestocks.com stock promotion site. The success of Xplosivestocks.com also drew the attention of Tony Papa who, according to documents obtained by the Montreal Journal, became the owner of Xplosivestocks.com with Eric Van Nguyen sometime before September of 2009. Tony Papa has long been closely tied to Vito Rizzuto, the Godfather of the Montreal mafia.
The involvement of the Rizzuto crime family in penny stocks goes back to the 1990s and early on centered around stock promoters like Robert Papalia (another interesting link here).
It was this new association with Tony Papa that really launched Eric Van Nguyen’s career as a penny stock promoter. Tony introduced Eric to all the big players in Montreal and Panama.
During 2009 and 2010, Eric Van Nguyen spent a lot of time partying with Tony Papa, Jean-Francois Amyot, and Anthony Gallo hitting the night clubs like Club 1234 and strip clubs on a regular basis.
By the fall of 2009, John Babikian was also brought into the mix as a part owner of Xplosivestocks.com with Eric Van Nguyen and Tony Papa. Babikian had been involved with some promoter group out of Texas and ran a promotion on Playbox Inc (PYBX) in late 2008. It was during the PYBX promo that John and Eric met for the first time. Being from Montreal and being a smart business man, Babikian probably saw the potential for much more success by getting involved with Eric Van Nguyen.
Together John Babikian, Eric Van Nguyen, and Robert Kalfayan would form a partnership that would change the face of the stock promotion industry. Kalfayan was close friends with Babikian and brought experience with email spamming having been named along with his brother in an email spam lawsuit in 2005. Kalfayan was also a former student at Concordia University just like Eric Van Nguyen.
Many of the early Awesome Penny Stock promotions also involved some of the Jay Fung and AJ Thompson controlled stock promotion websites which probably explains why the DOJ included the Sunpeak Ventures (SNPK) stock promotion from 2012 in their criminal Indictment. At some point (possibly before the SNPK stock promotion) Fung and Thompson sold their stock promotion websites to John Babikian and Eric Van Nguyen making millions of dollars from the deal. According to court records, Thompson sold his sites for $6 million. I’m not sure how much Fung made.
Awesome Penny Stocks would go to become the biggest name stock promoter from 2011 – 2013 causing a stock promotion hysteria that had never been seen before and has not been seen since. They had such a big following that at their peak, their stock promotions could generate $30m+ in volume during the first few hours of a new stock promotion.
But like anything build around fraud and deceit, Awesome Penny Stocks would eventually see its walls come crashing down through a series of major set backs:
In April of 2013 Anthony Kerrigone (the main market maker used to help back the Awesome Penny Stock promotions) bankrupted his WDCO office by creating an illegal short position in Lot78 Inc (LOTE) and being squeezed out of his position. Kerrigone changed firms to BMAK after his WDCO office went out of business, but that didn’t last long. FINRA eventually suspended Kerrigone in 2015 for his illegal short practices. In December of 2016, the SEC filed an Administrative Order against Kerrigone fining him for his Reg SHO violations. Anthony Kerrigone no longer works as a broker.
In September of 2013 SEC suspended two straight stocks while they were being promoted by Awesome Penny Stocks (PWEI and PWCT) making it obvious that APS now had a target on its back and the regulators would no longer allow APS to run any more stock promotions.
In October of 2013, the bombshell hit. John Babikian’s ex-wife, Alima Beg, filed a lawsuit against her former-husband exposing his involvement with Awesome Penny Stocks and naming several accounts used by Babikian to hold over $100 million in proceeds from his stock promotion business. The lawsuit was picked up by the Le Journal de Montreal and other news outlets in Canada putting pressure on the Canadian regulators for never going after the group. Oddly, the divorce law suit was dropped in July of 2014.
In March of 2014, the SEC filed a civil suit against John Babikian for his involvement in AWSRQ. According to the Complaint, Babikian used an Awesome Penny Stock promotion to run a quick pump and dump on AWSRQ selling 1.4 million shares for net gains of over $1.9 million. Babikian quickly settled the case agreeing to $3,730,000 in disgorgement, interest, and penalties which was peanuts compared to what Babikian made during his time running stock promotions through Awesome Penny Stocks. Babikian would end up fleeing Canada. Rumor is he moved to the United Arab Emirates where he had a dual citizenship.
Then, of course, in September of 2014, the DOJ of New York brought criminal charges against Eric Van Nguyen for his role in $290 million in pump and dumps from late 2009 – 2011. Van Nguyen remains at large.
Tony Papa remains in Canada seemingly untouchable because of his strong mafia ties and his past cooperations deals with the regulators helping them with a few busts including the Dan Ryan bust and the Jean-Francois Amyot bust. He still denies having any involvement with the stock promotion company.
In 2014, the Canadian authorities obtained a lien against a house owned by Robert Kalfayan valued at $385,000. Kalfayan ran into further trouble with the Canadian tax authorities in 2016 when he attempted to remove $700,000 in cash from the country.
Awesome Penny Stocks has continuously evolved since 2013/2014. Here at otcmarketresarch.com, we continue to closely follow all the promotions being run by the stock promotion websites that have descended from Awesome Penny Stocks dubbing them simply as the “Tier 1” stock promotion group.
The SEC files Suit
Even though the SEC had previously filed a Complaint in 2012 for the RYCT pump and dump that included Anthony Thompson and Jay Fung, the SEC brought a new lawsuit against Thompson, Fung, and Eric Van Nguyen on November 17, 2014. This Complaint also listed John Babikian and Kendall Thompson (wife of Anthony Thompson) as relief defendants.
The new Complaint was for the 5 of the other pump and dumps that Fung, Thompson and Nguyen participated in – BLAP, BGEM, SMHS, LYJN, and MHYS.
The Complaint accused the group of touting the stocks using misleading statements while selling shares that they owned netting at least $10 million in the process.
The SEC also alleged that John Babikian made at least $1 million assisting the group and Kendall Thompson received $200,000 in proceeds from one of the manipulations.
On February 1, 2019, the SEC obtained a judgment against Jay Fung. The judgment provides that the amount of any disgorgement and civil monetary penalties to be imposed will be determined by the court at a later date.
It is through a document filed by the SEC in their Civil Case that we learn about Anthony Thompson selling his stock promotion websites to Babikian and Van Nguyen for $6 million. We also learn that Thompson was still making money doing “consulting” for companies in Belize converting much of the money into cars, boats, jewelry, and other luxury items.
The SEC had become aware of that information thanks the a Divorce Law Suit filed by Kendall Thompson vs Anthony Thompson. In that case, Kendall Thompson alleged that Anthony was fraudulently diverting money from a trust set up to benefit their children and using the money to pay for “drugs and prostitutes, among other things“.
From that document:
The SEC entered a motion for a partial summary judgment against Anthony Thompson on February 15, 2019 which was accepted by the courts. Thompson’s attorney has until March 8, 2019 to answer the filing. It looks like, based on the Memorandum of Law in Support of the Partial Summary Judgment, that the SEC is seeking over $2.2m in disgorgement plus interest on that $2.2m along with a pretty hefty civil penalty.
Fung and Thompson get Jail Time
While dealing with the $290m stock manipulation scheme criminal Complaint, Jay Fung was arrested for his participation in a separate insider trading case involving Pharmasset Inc from 2011. He immediately entered a guilty plea in the case and was sentenced to 1 year in prison on January 17, 2018 also agreeing to forfeit $345,000 in the case. He is due to be releases on March 13, 2019.
Anthony Thompson was sentenced on January 4, 2019. He is supposed to report to jail on March 28th, 2019.
Some of the details from the Anthony Thompson sentencing hearing are pretty interesting. (Credit to Micheal Goode and his amazing blog for sharing some of the following details first).
It appears that originally after getting most of the charges dismissed, Anthony Thompson’s attorney Miranda Fritz was able to negotiate a plea deal that would have resulted in no jail time. That agreement depended on Anthony Thompson forfeiting $869,910 in restitution. Anthony had a whole year to come up with the funds, but did not do so. Anthony Thompson didn’t make a single restitution payment.
The prosecutor argued at the hearing that Thompson did still have money but it was in a trust:
Based on the following court conversation between the Judge and Thompson’s Attorney, Ms. Fritz, the Judge did not take kindly to that fact:
