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8 People Indicted for Penny Stock Fraud


A New York State Supreme Court in Manhattan recently indicted eight people for an alleged “pump-and-dump” scheme involving penny stocks. The accused individuals include three stock promoters and five other people that they reportedly worked with. According to the indictment, the scheme resulted in thousands of investors being defrauded from April 2009 to May 2012.

The alleged fraud involved the use of websites that were controlled by the stock promoters. The websites allegedly promoted stocks through emails that would be sent to potential investors. Officials allege that the promoters would artificially drive up the stock prices by taking control over public shell companies and then issue millions of the shares to themselves.

According to an attorney for one of the accused stock promoters, the activities in question were not fraudulent. The attorney claims that her client has been falsely indicted for advertisement, and the newsletters that were published outlined that they were to receive compensation for promoting the companies. She went on to say that most of the people who have been indicted for the alleged scheme have never actually met each other.

A criminal defense attorney might be able to help individuals facing a similar indictment by disputing the charges. In cases involving numerous people who worked together remotely, there is a chance that a miscommunication could have resulted in activities that may have appeared fraudulent. If there is substantial evidence against a defendant in a case, a lawyer could also pursue a plea agreement that could possibly propose alternatives to jail time.

Source: Bloomberg, “Eight Charged by N.Y. in $290 Million Pump-and-Dump Plot“, Chris Dolmetsch, September 11, 2014