ITEN's AJ Discala Kisses His Freedom Goodbye
Written by Janice Shell
July 30, 2014: It's midsummer, and the penny stock market is for the most part on vacation. OTC volume is extraordinarily low, especially when compared to the heady days of the pot rush in February and March. Promoters, perhaps rattled by the recent arrests of Eric Cusimano and Gabe Nix, are avoiding high-profile campaigns. Even the SEC seems to have reached for the umbrella drinks, scaling back sharply on suspensions and other enforcement actions in July.
AJ Discala
Jamie-Lynn Sigler
But there've been a few notable events to liven things up. One of the juiciest was the joint announcement by the SEC and the Department of Justice of indictments handed up and a major lawsuit filed in the matter of a $300 million penny stock manipulation scam run by Abraxas J. (AJ) Discala, CEO of OmniView Capital Advisors LLC and Fidelis Holdings LLC.
The Hollywood-handsome Discala, who bears a resemblance to Mad Men's Jon Hamm, enjoyed the spotlight, and was once married to Jamie-Lynn Sigler, co-star of HBO's classic series The Sopranos. They've since divorced, and Discala has remarried, but it's always good to see life imitating art, though nobody but shareholders got killed as a result of Discala's scheme.
Six co-conspirators--Marc Wexler, Ira Shapiro, Matthew Bell, Craig Josephberg, Kyleen Cane, and Victor Azrak--worked with Discala on his plan, and were indicted by the DOJ. Cane and Azrak were not named in the parallel SEC action.
The scheme
Discala and his cohorts' scheme is described by the SEC in its complaint as "sophisticated," but to experienced penny observers, it was not. The idea, as always, was to gain control of large amounts of the stock of one or more companies, run the stock, and then dump for outrageous profits. The only departure from the norm was that no paid promotions were used. Instead, Bell and Josephberg, who were brokers, simply encouraged their clients to buy. None of the three companies involved had a great deal of stock issued and outstanding, so relatively small purchases made for big moves in price.
The vehicle for the group's first Pump and Dump was CodeSmart Holdings, Inc. (ITEN). In early 2013, CodeSmart was a private company offering training in medical billing through its CodeSmart™ University. On 9 May 2013, CodeSmart executed a reverse merger transaction with First Independence Corp., an SEC registrant that filed its initial Form S-1 on 11 April 2012. The SEC says that in 2012 and 2013, Discala, Wexler, Bell, and Josephberg came to control 3 million of the company's 6 million shares outstanding. By May 2013, when the reverse merger was executed, the group directly owned 1,537,500 shares, or 51 percent, of the original 3 million, and had handed the remaining 49 percent to Discala's family and some business associates. At the time of the merger, those "friends and family" shares were "invisible," as their holders didn't qualify as greater-than-5-percent owners. It was therefore not apparent in the relative 8-K that Discala's group was in charge.
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