Franklin, Andrews, Kramer & Edelstein

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Five Floridians busted in “pump and dump”

Wednesday, October 6, 2010, 11:34am EDT
South Florida Business Journal
http://southflorida.bizjournals.com/southflorida/stories/2010/10/04/daily30.html

Five Floridians were among 11 arrested Tuesday in what authorities say was a $7 million “pump-and-dump” stock scam that used social networking to dupe its victims.

The discovery of the financial scam grew out of a separate cocaine trafficking probe that led to charges against eight longshoremen, who worked at the Port of New York and New Jersey, and three others.

The longshoremen are alleged to have used their security clearance to avoid detection and unload drugs from Panama.

In that investigation, authorities seized 1.3 metric tons of cocaine valued at more than $34 million, according to the complaint.

It was during the investigation that law enforcement officials discovered a longshoreman had received money from others to put toward a penny stock, which was being promoted on more than 15 websites, as well as on Facebook and Twitter.

The men arrested in that scheme are alleged to have made $3 million, while investors lost about $7 million.

The “Internet stock tips” purported to provide penny stock picks based on the authors’ expertise and independent research, according to the news release. However, participants in the stock fraud were the ones who are alleged to have orchestrated the tips to dupe investors into buying the stock, causing its price to rise and generate trading volume.

“Once those goals were achieved, participants in the scheme sold their interests in the stock and realized gains, the fraudulent recommendations ceased, and victims who purchased while stock prices were on the rise lost a significant portion of their investment, sometimes within hours,” according to the release.

“The crimes alleged in this case show how something that appears to be a sure thing can be a mask for a tangled web of financial lies,” said Victor W. Lessoff, special agent-in-charge of the New Jersey office of the IRS-CI, in a news release.

The 11 arrested are charged with one count of conspiracy to commit wire fraud, which carries a maximum sentence of 20 years in prison.

The Floridians charged were identified as Jeffrey Hurwitt, 42, of Fort Lauderdale; Ricardo Fernandez, 39, of Palmetto Bay; Donna Levy, 55, of Fort Lauderdale; Michael Steinberg, 54, of Boca Raton; and William Mackay, 59, of Plantation.

http://southflorida.bizjournals.com/southflorida/stories/2010/10/04/daily30.html