Indictment - David Levy, Donna Levy, Thomas Prezioso, and Ricardo Fernandez
Relevant tickers - Banneker, Inc. (BANI), Cardiac Networks, Inc (CNWI), Paradigm Medical Industries, Inc (PDMI), Metatron, Inc (MRNJ), Emerging World Pharma, Inc (EWPI), Talent Alliance, Inc (TLAN), and GreenGro Technologies, Inc (GRNH). https://viewer.zoho.com/docs/qTabM Summary from the Indictment:
The Indictment describes a scheme to defraud founders and executives of, and investors in multiple start-up companies by Donna Levy and David Levy.
David Levy would target non-public companies then orchestrate reverse mergers between the Target Companies and shell companies with publicly-tradeable shares. The mergers occurred in connection with agreements between David Levy and founders and executives of the Target Companies to provide needed start-up financing for these companies. Alternatively or in conjunction with the mergers, David Levy provided financing to the Target Companies by obtaining convertible notes granting him shares of the Target Companies. Levy would place those shares in the following entities (among others): EZ English, Date Palm Capital, Fitzwilliam Investments, DML Marketing, and Miracle Marketing (collectively, the "Levy-Controlled Entities").
Once the principals of the Target Companies entered into a financial relationship with David Levy, David Levy persuaded the Target Companies to use his wife, Donna Levy, to coordinate investor relations and marketing activities for the companies. In this role, Donna Levy was given authority to oversee the drafting, timing, and distribution of press releases and other marketing materials for the Target Companies.
Donna Levy and David Levy drafted and distributed, or caused to be distributed, press releases and other marketing materials for the Target Companies that at times contained exaggerated, misleading, and/or false information.
David Levy and Donna Levy paid third parties through the Levy-Controlled Entities, at times secretly, to draft and disseminate to the public "touts" recommending that prospective investors to buy shares of stock in the Target Companies at the same time that David Levy and Donna Levy were causing large numbers of press releases and marketing material to be disseminated to the public in the names of the Target Companies. David Levy and Donna Levy knew that aspects of several of the touts that they paid to have disseminated were exaggerated, misleading, and/or deceptive in part because as insiders of the Target Companies, they possessed information concerning the Target Companies' shortage of capital, operational issues, and dependence on David Levy and others for future financing that was not available to the public. Moreover, many of the touts that were privately funded by David Levy and Donna Levy contained inadequate disclosures concerning the roles that David Levy and Donna Levy played in paying for and influencing the content of the touts.
David Levy and Donna Levy took advantage of the artificial increase in the price of stock in the Target Companies, and increased public interest in the Target Companies, that they orchestrated by "dumping" shares in the Target Companies that they had acquired through the debt arrangements.
Following the conclusion of this misleading promotional campaign, the price of and investor interest in shares of the Target Companies collapsed, thereby harming investors in the Target Companies who had been induced to invest, in part, in reliance on the misleading promotional campaign.
After months or, in some cases, more than a year had passed, David Levy and Donna Levy again started to "pump and dump" Target Companies in which they continued to hold large blocks of shares.
Just from the sales of shares in two Target Companies alone (Cardiac Networks - CNWI, and Banneker, Inc - BANI), David Levy and Donna Levy made over $6.5 million between 2007 - 2010.
David Levy and Donna Levy used proceeds from the fraudulent scheme to finance a lavish lifestyle, including several luxury cars, large credit card expenses, and mortgage payments on a waterfront home in Fort Lauderdale, Florida, and to provide financing to Target Companies and new companies in exchange for stock that could later be manipulated.
Besides David Levy and Donna Levy other defendants were named as being involved in similar pump and dump schemes on the following stocks:
Paradigm Medical Industries, Inc (PDMI) by Thomas Prezioso and Ricardo Fernandez from January of 2009 - June of 2009
Metatron, Inc (MRNJ) by Thomas Prezioso and Ricardo Fernandez from July of 2009 - March of 2010
Emerging World Pharma, Inc (EWPI) by Donna Levy, Thomas Prezioso, and Ricardo Fernandez from March of 2010 - June of 2010
Talent Alliance, Inc (TLAN) by Thomas Preziosos from March of 2010 - June of 2010
GreenGro Technologies, Inc (GRNH) by Thomas Preziosos from March of 2010 - June of 2010 Full details found here: https://viewer.zoho.com/docs/qTabM
It is a well written Indictment. In my opinion, you could just take out the names from the Indictment and replace them with Big Apple Consulting or Belmont Partners. More on the Indictment and Arrest of David Levy here: http://www.justice.gov/usao%2Fnys%2Fpressreleases/December11/levydavidarrestpr.pdf MANHATTAN U.S. ATTORNEY ANNOUNCES NEW CHARGES AND ADDITIONAL ARREST IN “PUMP AND DUMP” STOCK FRAUD PROSECUTION
Superseding Indictment Charges Two Defendants with Allegedly Participating in a $6.5 Million Scheme to Defraud Start-Up Companies
Preet Bharara, the United States Attorney for the Southern District of New York, and Victor W. Lessoff, the Special Agent-in-Charge of the Newark Field Office of the Internal Revenue Service, Criminal Investigation (“IRS-CI”), announced today the arrest of DAVID LEVY for allegedly participating with his wife DONNA LEVY in a $6.5 million “pump and dump” scheme to defraud start-up companies. DONNA LEVY was previously charged in the Southern District of New York, along with 10 others, for engaging in a market manipulation-for- hire scheme. A Superseding Indictment unsealed today includes new charges against DONNA LEVY and adds her husband DAVID as a defendant. The Superseding Indictment also adds new details to charges against THOMAS PREZIOSO concerning the previously-charged manipulation-for-hire scheme. DAVID LEVY surrendered to authorities in Fort Lauderdale, Florida, earlier today and will be arraigned before United States District Judge Paul A. Crotty at a later date.
Today’s charges are the result of an ongoing investigation by the Government into so- called “pump and dump” stock fraud schemes that employ the Internet and social networking sites, among other tools, to manipulate the price of penny stocks. In October 2010, 11 individuals were charged with participating in the manipulation-for-hire scheme. Eight defendants have already pled guilty for their roles in the scheme, including four defendants – RICARDO FERNANDEZ, WILLIAM MACKEY, BRADLEY SUSSER, and STINSON BLAND – who pled guilty this week.
Manhattan U.S. Attorney Preet Bharara stated: “As alleged, David and Donna Levy executed an elaborate ‘pump and dump’ scheme that defrauded multiple start-up company executives and investors out of millions of dollars, and used the proceeds of the fraud to finance their lavish lifestyle. Today’s arrest and new charges underscore this Office’s ongoing commitment to pursuing and prosecuting individuals who engage in such schemes.”
IRS-CI Special Agent-in-Charge Victor W. Lessoff stated: “The allegations in this case show the appearance of success can be a mask for a tangled financial web of lies. Financial fraud schemes are often described as a house of cards and the underlying structure can fall apart at any time exposing the individuals responsible.”
As alleged in the Superseding Indictment, other documents previously filed in the case, and statements made in court: The Start-Up Company Stock Fraud Scheme
DAVID LEVY and his wife, DONNA LEVY, defrauded multiple start-up companies in need of capital, and investors in those companies, by manipulating the start-up companies’ stock when helping to take them public. The scheme worked as follows: DAVID LEVY and DONNA LEVY offered to help start-up companies obtain financing, take the start-up companies public, and coordinate marketing and investor relations, in exchange for shares in the companies. Among other things, they failed to disclose to the start-up companies that they had previously been found by a federal court to have engaged in a telemarketing scholarship scam and were permanently barred from engaging in deceptive marketing activities.
Once the companies had gone public, DONNA LEVY put out several misleading press releases on behalf of the target companies, and she worked with DAVID LEVY to secretly fund and distribute misleading third-party “buy” recommendations concerning the targeted companies. These misleading promotional campaigns, along with other manipulative conduct, caused increased demand for stock in the targeted companies, which caused the prices of the stocks to rise. DAVID LEVY, DONNA LEVY, and their co-conspirators took advantage of the “pumped-up” stock trading volume and prices to “dump” their shares into the market until the misleading promotional campaigns had run out of steam. They would repeat the scheme multiple times until the target companies’ shares were essentially valueless, thereby harming company founders and executives, as well as innocent investors who bought shares in reliance on the misleading promotional campaigns they orchestrated.
The Superseding Indictment also charges DAVID LEVY and DONNA LEVY with orchestrating multi-year pump and dump securities fraud schemes involving two companies that they helped take public: Cardiac Network, Inc. and Banneker, Inc. According to the Superseding Indictment, DAVID LEVY, DONNA LEVY, and co-conspirators made over $6.5 million from the manipulation of these two stocks alone. The Manipulation-For-Hire Scheme
In addition to new charges related to the start-up company stock fraud, the Superseding Indictment also adds further details concerning a previously-charged market manipulation-for- hire scheme in which DONNA LEVY and other defendants, including THOMAS PREZIOSO, allegedly took part. As alleged in the Superseding Indictment and other documents previously filed in the case, DONNA LEVY and PREZIOSO were paid by others who were interested in dumping large holdings of penny stocks, directly or through intermediaries, to post or fund misleading stock “buy” recommendations on social networking sites such as Twitter and Facebook, and on purportedly independent stock analysis websites and email newsletters. Participants in the scheme also engaged in manipulative trading of stocks targeted by the scheme. They did so knowing that their conduct would help pump up the prices of the stocks they were manipulating so that their funders could sell and make quick profits from unsuspecting investors who would be harmed once the secretly-funded manipulative campaign ended and the stock crashed. Stocks targeted by the scheme lost at least $7 million in shareholder value.
The Superseding Indictment also alleges five pump and dump securities frauds concerning specific stocks that were manipulated by participants in the scheme. The Superseding Indictment also contains money laundering charges against PREZIOSO arising out of his efforts to conceal the ownership and control of the money they and others were receiving for participation in the scheme.
Eight defendants have already pled guilty to charges arising out of the manipulation-for- hire scheme earlier this year, on the dates and to the charges listed below:
DAVID LEVY, 59, of Fort Lauderdale, Florida, faces a maximum sentence of 45 years in prison. Charges against DAVID LEVY and previously-arrested defendants DONNA LEVY and THOMAS PREZIOSO, who are presumed innocent unless and until proven guilty, are still pending. David Levy + Donna Levy = Serial Scam Artists: http://www.ftc.gov/opa/1997/09/levy.shtm
For Release: September 30, 1997
FTC WINS PERMANENT INJUNCTION AGAINST "$CHOLAR$CAM" DEFENDANTS
Court Orders $6 million in Consumer Redress; Imposes $6 million Bond Requirement
A federal district court judge has upheld Federal Trade Commission charges against a husband and wife who ran a scholarship search service scam that defrauded consumers of over $6 million. The court found that Donna and David Levy orchestrated the fraudulent practices used by Career Assistance Planning also known as College Assistance Planning (CAP), thereby duping tens of thousands of students and their parents into paying for services the company failed to provide. The judge granted the FTC's request for summary judgment, ordered the Levys to pay over $6 million in consumer redress and also ordered them to post a $6 million performance bond before engaging in any telemarketing activity in the future.
The FTC filed its complaint against CAP, David Chaim Levy, Donna M. Levy and Becky Burch Settles in August 1996 in the federal district court in Atlanta. (Becky Settles signed a settlement agreement with the FTC that was entered by the court in February 1997.)
The defendants sent millions of postcards stating that recipients who called a toll-free number would receive information on free college scholarships. In subsequent telephone conversations, CAP telemarketers often claimed that the company had a 60 to 80 percent success rate in obtaining scholarships for its customers. The defendants offered a full refund of their $299 fee for students who did not receive at least $1000 in scholarship money. The defendants also often convinced consumers to give their credit card or bank account number, assuring them that it would not use the account information without the consumer's "final authorization." The FTC alleged that the defendants routinely debited many consumers' checking accounts or charged their credit accounts without authorization.
The district court, in entering summary judgment against David and Donna Levy, found that the Levys were responsible for CAP's fraudulent conduct. The court observed that CAP had received over 2,500 consumer complaints, many from consumers who did not receive scholarships or the refunds that the defendants promised.
The FTC’s case against CAP and the Levys is a part of "Project $cholar$cam," a major law-enforcement and consumer education campaign targeting scam artists who promise "free money for college," charging from $10 to $400 for their services.
The court's final order permanently prohibits Donna and David Levy from making numerous false representations about any future scholarship search service. The defendants also are prohibited from engaging in any future telemarketing activities unless they each first obtain a $6 million performance bond. The court order bars the defendants from misstating how a consumer's bank account or credit information would be used and from withdrawing money from a consumer's checking accounts or billing charges to their credit cards without first obtaining express written authorization from the consumer.
The court also has ordered the Levys to pay $6,087,036 in consumer redress. The Commission will make its best efforts to collect this money, but there is no guarantee that the Levy defendants will pay the sum they owe. If the Commission determines that redress is impractical, any funds collected will be deposited into the U.S. Treasury as a disgorgement remedy. Finally, the court's order contains various reporting provisions that will assist the FTC in monitoring the defendants' compliance.
The judge granted the FTC's motion for summary judgment (without trial) and entered the order on September 19, 1997. The final judgment and order was filed in the U.S. District Court for the Northern District of Georgia, Atlanta Division.
The FTC received tremendous assistance in this case from the Broward Sheriff's Office, the Georgia Governor's Office of Consumer Affairs, the Better Business Bureaus of South Florida and Atlanta and the Oregon Attorney General's Office.
Copies of the final judgment and order for permanent injunction, a free package of consumer information from the FTC on how to identify a fraudulent scholarship search service, and other documents associated with this case are available from the FTC's web site at: http://www.ftc.gov
and also from FTC's Public Reference Branch, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-326-2222; TTY for the hearing impaired 1-866-653-4261. To find out the latest FTC news as it is announced, call the FTC's NewsPhone recording at 202-326-2710.
Brenda A. Mack,
Office of Public Affairs