Partially redacted transcript of Matt Brown's sentencing hearing now available thru PACER. See DE #65 in 09cr00046 in DEDC.
Matt's attorney: And I think it's significant given the fact that
the government has asked for a forfeiture of 4.7 million, that the three million of those funds went to an individual that was neither charged nor prosecuted. And these are the S.H. shares I'm speaking about, which would have gone directly to Mr. Mack.
Prosecutor: Responding specifically to Mr. Garey's argument, as the Court knows from the presentence report, the funds that were generated from the Asia Global fraud were wired offshore. We don't know what happened to them at this point except to know that they were distributed among the conspirators in the fraud, and under the principles of Pinkerton, liability as well as relevant conduct in the
guidelines, the defendant, as a member of the conspiracy throughout the fraud, is responsible for that reasonably foreseeable gain, and therefore the reasonably foreseeable loss for purposes of the guideline calculation.
Prosecutor: The victims of this fraud are not corporations, they're not banks. They're not even institutional investors or sophisticated m oney managers, and that's because this fraud was committed in the penny stock markets. And the penny stock markets by and large attract the least sophisticated investors that are out there. [..] There is very little in the way of SEC reporting that is done, let alone required, and so we're dealing with the ultimate world of caveat emptor when we're dealing with the penny stock market.
And the class of victim investors who were targeted by this offense were those investors who rely on Internet chat rooms, bulletin boards, message boards to make their investment decisions. And what the defendant and his co-conspirators did was take advantage of that class of investors to perpetrate this fraud. And ultimately what they did is they rigged the game. They had the cooperation of traders, of the issuers of these securities, of stockbrokers and promoters to rig
the game. It's like walking into a casino and you know there's a risk. You know that if you play the slots, chances are pretty good you might lose your money, and you might -- but you think you might win some money, too, if you play blackjack or what have you.
But what the defendant and his co-conspirators did is they gave the appearance of a casino when there's no way that slot machine is going to come up triple bars. There's no chance that when you play blackjack in their casino that you are ever going to get 21, and that's because
they created the artificial impression of a market when there was no market. [..]
This defendant knew what he was doing, and I included examples in our papers for the Court to illustrate this. But in sum, this was a defendant who was not making a mistake. This was not a momentary lapse of judgment. As he admitted in the presentence investigation, he used the very business that he had created, this business called iHub,
which was the online stock messaging board that they used in
furtherance of the crime. The community that he created online was the community that he victimized. This defendant knew what he was doing and continued to do it. [..]
When it comes to deterrence, your Honor, the government is not arguing that specific deterrence is a serious issue here. [..] However, I think this is one of those situations where there actually is an opportunity for general deterrence.
I know there is research out there suggesting that general deterrence is hard to accomplish through an individual sentence, but what we pointed out in our papers and I'd like to emphasize for the Court is that there is actually a very specific community that is very, very
closely paying attention to this case. I mentioned in our papers that there is a message board on iHub dedicated to this case that has been
in existence since the indictment was returned, where there have been over 15,000 posts in the last two years. The online trading community is paying attention to this case, and I think there are others out there. I know there are others out there who are engaged in this type of fraud or may be contemplating getting involved in this type of fraud.
And so this is a situation where a sentence in a particular
case will be heard by a particular community.
Matt: Your Honor, I stand before you today absolutely ashamed of myself for the decision that I made and what I allowed myself to get into. I'm extremely regretful for the impact that it had on anybody that invested in these stocks that I was involved with and got hurt as well as the impact that it has had on my family and friends and colleagues and people close to me.
I have totally blown it and let everybody down and I know that and it has been absolutely the most painful lesson in my life I've ever had to go through. I'm now a convicted felon. I have all of those hurdles that that entails to deal with for the rest of my life. My reputation online that I spent so many years building has been completely destroyed by this case. Not this case, by what I did. And that hurts a lot.
The -- just reflecting on this, the result of my stupidity are just overwhelming, and I'm extremely afraid of the sentence that you are about to issue me, but at the same token, I want to let the Court know that I'm actually very thankful for this case in many ways. I got involved in activities and with people that I should never have been
involved with, did things I shouldn't have. And my family raised me to be a better person than, you know, doing the things that I did.
This case, you know, has stopped me from going even further into the abyss that I was going into with the involvement and the things that I was doing, and I was able to -- you know, I've corrected that behavior and learned so many valuable lessons because of this. I'm now focused on right and productive things, aligned myself with some truly incredible friends and colleagues, and I've been removed from the bad element that I was involved in. I'm now in a proper environment and I'm
very fortunate to be being mentored by some very impressive people. I've become socially responsible with my local community, something that prior to this case, I was not.
And I've put significant effort into educating the investing public over the last few years as an absolute direct result of this case, and I've, as noted in the sentencing memorandum, I've even put together a letter for the SEC, addressing what I think would have prevented the GH3 fraud, and will continue to do things like that to help the SEC
out.
And I've got so many ideas on education and helping people to invest properly because over the last few years, like I said, I'm being mentored, I have learned how to invest properly and the right type of stocks to get involved in, and I want to share that with the world. And
because of Investor's HUB, I'm in a rare and unique position to make a difference on a very, very large scale, and as, you know, we've submitted in the sentencing memorandum, I've started that and will only continue to do that in as many ways as possible.
Your Honor, I know I'm on the right track now. I've grown up a lot since I was 24 years old, and I hope that you'll consider who I am today when sentencing me.
Judge: Mr. Brown, how ironic is it that you come before me for your part in a scheme to defraud members of the investing community, the same community in which you have been a part since you were 16, the same community that legitimately made you a millionaire by the time you were 25, the same community that continues to support you.
Sadly, I suspect, the situation reflects failings in both you and the investing community, the failings being greed I think obviously, but I suggest more dangerous than greed -- and I really don't think greed was
your motivation -- is this peculiar kind of arrogance associated with computer crimes. The victims are not real and the conduct can be seen as nothing more than the same kind of intellectual exercise you undertake when you are playing one of these complexion realistic computer games.
It is the stuff of all manner of entertainment media, romanticizing these computer geniuses who are able to take advantage of the rest of the world because they are so much smarter. Shame on you for using your intellect and abilities in this dangerous and frivolous way, without
thought of the consequences to the real victims of your conduct.
Nevertheless, once again, the guideline sentence of more than seven years for someone like you, who is young, who has no criminal record, who has contributed legitimately to society and who has admitted to and who is remorseful for the errors of your ways is, I don't believe, just
punishment. I think it is unduly harsh punishment. Therefore, I am going to vary from the guideline range, but a term of incarceration is absolutely appropriate in this case, and one that is longer than the 36-month period of incarceration given to your co-conspirator, as I find your role in the scheme more compelling than his was.
