Operation Spamalot

[righty]

Internet Securities Fraud Scheme Charges
Published Wed, 2007-11-07 16:46 Internet
R. Alexander Acosta, United States Attorney for the Southern District of Florida, Jonathan I. Solomon, Special Agent in Charge, Federal Bureau of Investigation, and Don B. Saxon, Commissioner, Florida Department of Financial Regulation, announced today the filing of an Information charging defendants Gerald Milligan , 47, and Andrew Mariani , 31, both of Wellington, Florida with conspiracy to commit wire fraud, in violation of Title 18, United States Code, Section 371. Each defendant faces a maximum penalty of five years’ imprisonment, a $250,000 fine, 3 years supervised release, and restitution. An initial appearance for Mariani is scheduled before United States Magistrate Judge Linnea R. Johnson on Wednesday, November 7, 2007, and for Milligan on Friday, November 9, 2007.

As set forth in the Information, Milligan ran an internet securities website through a company called Options Management Specialists, Inc. (OMSI). Mariani, a licensed stock broker, had an undisclosed affiliation with OMSI. Between August, 2005 and June, 2007, OMSI received over $1.1 million from approximately 100 investors. Approximately $150,000 of the funds were traded and mostly lost by Mariani. The remainder of the funds were used to support Milligan’s lavish lifestyle, to make approximately $30,000 in payments and loans to Mariani, and to make purported investment payments to the original investors. To perpetuate the scheme and lull investors into a false sense of security, Milligan, using various aliases and with the knowledge of Mariani, sent e-mails to investors falsely reporting the successful investment of their funds. When investors began requesting return of principal and voicing suspicions about the company, Milligan sent e-mails to investors falsely claiming their monies had been lost due to poor investments in certain failing companies. Mariani researched and gave the names of the failing companies to Milligan for this purpose.

Mr. Acosta commended the investigative efforts of the Federal Bureau of Investigation and the Office of Financial Regulation, State of Florida. This case is being prosecuted by Assistant United States Attorney Carolyn Bell.

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 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 www.flsd.uscourts.gov or on http://pacer.flsd.uscourts.gov .



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Anti-Spam Initiative, SEC The SEC Division of Enforcement's Online Complaint Center indicates a 30 percent decrease in spam-related complaints during the same 12-month period, with complaints dropping from more than one million complaints during the final six months of 2006 to 727,313 during the first 6 months of 2007.



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Spam Pump and Dump Guilty Plea According to the charges to which all of the defendants have pleaded guilty, the stock manipulation schemes employed by the co-conspirators for each of the companies followed a similar pattern. In general, the co-conspirators either solicited the company directly or were introduced to the company by a co-conspirator. In most instances, the companies were small privately-held companies that needed to raise money.



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Email and Securities Fraud To effectuate the spam email campaigns, the co-conspirators hired a promoter to distribute the spam email to individuals throughout the United States, primarily to email accounts registered with American Online through AOL’s servers located in the Eastern District of Virginia.



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SEC Suspends Trading Of 35 Companies The trading suspensions are part of a stepped-up SEC effort - code named "Operation Spamalot" - to protect investors from potentially fraudulent spam email hyping small company stocks with phrases like, "Ready to Explode," "Ride the Bull," and "Fast Money." It's estimated that 100 million of these spam messages are sent every week, triggering dramatic spikes in share price and trading volume before the spamming stops and investors lose their money.