A Stoney Creek man is wanted in connection with a massive penny stock fraud scheme that bilked Canadian and foreign investors of more than $140 million.
Sandy Winick, 55, is one of nine individuals — and one of four Canadians — U.S. authorities have indicted in the scheme, which the U.S. Department of Justice is calling one of the largest international penny stock frauds in history.
One of the Canadians was arrested in Ontario and another was among six suspects arrested in the U.S., the Federal Bureau of Investigation (FBI) said in a statement.
Gregory Ellis, 46, and Kolt Curry, 38, are in custody. But authorities said Winick remains at large in Thailand and Gregory Curry, 63, has yet to be located.
Ellis, who lived in Canada at the time of his arrest, acted as president of several of the companies that issued the stocks, according to an indictment.
'They cheated, lied and swindled investors into buying billions of shares of worthless stock, then turned around and used a second scam to cheat those investors again.' —U.S. Attorney Loretta Lynch
Winick "orchestrated" the schemes and had lived in Canada, the U.S., China, Thailand and Vietnam over the years, the document said. He allegedly was recruiting staff to open new call centres to expand the operation in New York City and Toronto.
Gregory Curry helped manage the existing call centres in Canada, Vietnam and Thailand, where he lived, the document said. He worked with Kolt Curry, who split his time between Canada and Thailand, it said.
The two Curry men — whom the department identified as father and son — also prepared letters and email accounts to promote the con, the indictment said.
The arrests were the result of a multi-year investigation involving the FBI and the RCMP, the department said, adding it relied on wiretaps in the U.S. and undercover agents abroad. The RCMP declined to comment on the investigation.
The indictment alleges that the defendants were involved in a massive "pump and dump" scheme — buying controlling interests in sketchy startup companies, then artificially inflating their value by promoting them in fictitious emails, social media messages and news releases.
The fraudulent sales campaign generated more than $120 million in investments by tens of thousands of people in the United States, Canada and 33 other countries, authorities said.
Working out of boiler room phone centres in Canada, Thailand and Britain, the defendants again victimized the same investors by convincing them to pay $20 million in advance fees in return for helping them sell their securities or join lawsuits to reclaim their losses, court papers said.
In some cases, it's alleged the accused pretended to work for the U.S. Internal Revenue Service.
Hundreds of Canadian victims
The list of victims included several hundred Canadians, Justice Department spokesman Zugiel Soto said in an email to The Canadian Press. "Where others saw citizens of the world, the defendants saw a pool of potential marks," U.S. Attorney Loretta Lynch said in a statement.
"They cheated, lied and swindled investors into buying billions of shares of worthless stock, then turned around and used a second scam to cheat those investors again."
Heath Rodgirs, a senior fraud investigator with Prince-Langevin and Associates in Edmonton, said "pump and dump" schemes are very common and penny stocks — which often trade outside the major market exchanges — are particularly vulnerable.
"Because they're so cheap and there's so many of them, it gives a fraudster an opportunity," he said.
"It doesn't take much to set up a company and make it look like something. So just by the nature of penny stocks, there's a greater ability for fraud in it."
Securities commission ruling
The U.S. indictments came less than a week after an adjudicator with the Ontario Securities Commission (OSC) ruled that Winick had committed unregistered trading and securities fraud between June 2009 and late 2010.
In his decision, the OSC's James D. Carnwath ruled that Winick had been the "direction mind and management" of BFM Industries Inc. and Liquid Gold International Inc. Those two Ontario companies were found to have been "entirely fraudulent" and to have had "no legitimate business."
Shares from both shell companies, Carnwath wrote, had been sold via telephone to international investors through Denver Gardner, Inc., a fake investment bank.
"I accept that Denver Gardner is a fictitious entity created by Winick to mislead investors," the ruling stated. "Winick used Denver Gardner to sell shares of Liquid Gold, an inactive company, to the public, which is a dishonest course of conduct that was detrimental to the economic interests of investors."
Carnwath also wrote that Winick "accepted" a total of more than $1.5 million from the BFM and Liquid Gold accounts for his "own personal benefit." Hundreds of thousands of dollars of that money was used to payments on credit cards belonging to Winick, his wife Jodi and Andrea McCarthy, a Stoney Creek woman who lived with Winick and was involved in the creation and administration of both companies.
McCarthy was listed as the director of Liquid Gold — a company mentioned in the U.S. indictment — and BFM, when it was incorporated in late-2008, was registered to her home address.
Sanctions in the case are expected in September.
The American suspects in the penny stocks scheme are Gary Kershner, 72; Joseph Manfredonia, 45; Cort Poyner, 44; Songkram Roy Sahachaisere, 43; and William Seals, 51.
The charges include conspiracy to commit securities fraud, conspiracy to commit wire fraud, wire fraud, securities fraud and false personation of an officer of the United States.
If convicted, the accused could face up to 20 years of imprisonment for each count of conspiracy to commit wire fraud, wire fraud and securities fraud, as well as up to five years for conspiracy to commit securities fraud.
The false personation charge could carry a three-year prison sentence.