Pump-and-Dump Schemes

Securities Attorney Sentenced to 33 Months in Prison for Role in Pump-and-Dump Schemes

March 15, 2010 - WASHINGTON—A securities attorney was sentenced today to 33 months in prison for defrauding investors in stock manipulation schemes involving 19 publicly traded companies, Assistant Attorney General Lanny A. Breuer of the Criminal Division and U.S. Attorney Neil H. MacBride for the Eastern District of Virginia announced today.

David B. Stocker, of Phoenix, pleaded guilty on March 11, 2009, in U.S. District Court in Alexandria, Va., for his participation in a stock manipulation conspiracy known as a “pump-and-dump” scheme. Along with the prison sentence, U.S. District Judge Liam O’Grady today ordered Stocker to pay jointly and severally $6,360,191 in restitution and to forfeit $2,175,993 in a money judgment as well as other property and assets.

“Mr. Stocker used his expertise to exploit unsuspecting investors,” said Assistant Attorney General Lanny A. Breuer. “Our financial markets must be fair and open to all, and those who illegally manipulate those markets will be caught and prosecuted.”

“David Stocker used his expertise as a securities lawyer to help others steal millions of dollars from thousands of innocent investors around the country,” said U.S. Attorney MacBride. “Today’s sentence sends a strong message to securities professionals that schemes to defraud the public will not be tolerated.”

Stocker admitted that he participated in a conspiracy to commit securities fraud involving 19 publicly traded companies including: eDollars Inc; Emerging Holdings Inc.; MassClick Inc.; China Score Inc.; American Television and Film Company Inc.; Auction Mills Inc.; Custom-Designed Compressor Systems Inc.; Ecogate Inc.; Media International Concepts Inc.; Vanquish Productions Inc.; AVL Global Inc.; Motion DNA Corp.; PokerBook Gaming Corp.; TKO Holding Ltd; Body Scan Inc.; Integrity Messenger Corp.; Beverly Hills Film Studios; IFINIX Inc.; and V3 Global Inc.

According to court records, the stock manipulation scheme employed by Stocker and his co-conspirators followed a common pattern. Stocker admitted that he acted as securities counsel for companies, and he and others fraudulently caused the companies to issue millions of “free-trading” shares to co-conspirators in transactions that had not been registered with the SEC. As Stocker acknowledged in his plea, after the unregistered and free-trading shares had been issued, co-conspirators began to manipulate, or “pump,” the trading value of the companies’ stock through a number of deceptive and manipulative means to entice members of the investing public to invest in the stock. For example, according to court documents, members of the conspiracy engaged in coordinated trades to manipulate the price of the stock.

Stocker also admitted that co-conspirators falsely manipulated the price and volume of some of the companies’ stock by making materially false and misleading statements in press releases and in spam e-mails distributed by co-conspirator Justin Medlin and other spammers to tens of millions of e-mail addresses throughout the United States in an effort to create artificial demand for the companies’ stock. After fraudulently “pumping” the market price and demand for the companies’ stock, co-conspirators “dumped” millions of shares by selling them for large profits to the general investing public in the over-the-counter market through listings on Pink Sheets, an inter-dealer electronic quotation and trading system. These shares were purchased by unsuspecting investors, including investors in the Eastern District of Virginia, and were often rendered virtually worthless.

Ten other defendants have pleaded guilty and eight of them have been sentenced in federal court in Alexandria, Va., for their roles in related stock manipulation schemes, including Michael R. Saquella who was sentenced to 10 years in prison; Justin Medlin who was sentenced to six years in prison; and Steven P. Luscko and Gregory A. Neu who were each sentenced to five years in prison.

Stocker’s sentence reflected his cooperation and testimony in the trial of Phillip Windom Offill Jr., of Dallas, a former SEC attorney who was convicted by a federal jury on Jan. 28, 2010, of one count of conspiracy to commit registration violations, securities fraud and nine counts of wire fraud. Offill is scheduled to be sentenced on April 16, 2010.

The case, which was referred by the Market Regulation Department of Financial Industry Regulatory Authority (FINRA), was investigated by the FBI and the U.S. Postal Inspection Service, with assistance from FINRA’s Criminal Prosecution Advisory Group. The case was prosecuted by Fraud Section Deputy Chief Patrick Stokes and Assistant U.S. Attorney Ed Power of the Eastern District of Virginia. The Department of Justice acknowledges the substantial assistance of FINRA and the SEC in its investigation. It would also like to thank the Virginia State Corporation Commission, Division of Securities and Retail Franchising, for its assistance.