NEW YORK (06/15/2000) - In a massive crackdown ranging from Wall Street to Las Vegas - with the Internet interwoven along the way - the U.S. Attorney's Office here has charged 120 people with securities fraud in a roundup of executives, entrepreneurs, and mobsters. Federal prosecutors are calling it one of the Mob's deepest forays into the stock market, using the Internet - and the popularity of Internet stocks - to lure unsuspecting investors. Total losses from the various scams reached more than $50 million, according to the Federal authorities.
The indictments were announced by the U.S. attorney's office for the Southern District of New York, the Securities and Exchange Commission, and the Federal Bureau of Investigation. According to the SEC, the charges range from extortion and bribery to witness tampering and murder solicitation.
The SEC's director of enforcement, Richard Walker, said "the securities fraud involved in today's actions is among the most egregious witnessed in recent years."
In connection with the indictments, the SEC suspended trading in Wamex Holdings and E-Pawn.com, both over-the-counter bulletin-board stocks which allegedly furnished improper information to investors. E-Pawn.com's president Eli Leibowitz, who was also charged in the probe, resigned after the SEC's announcement, and the company issued a release distancing itself from Leibowitz.
In late February, Wasatch International announced it was changing its name to E-Pawn.com, an online auction and pawn shop company, and would trade under the EPWN symbol as of March 1. Within days the stock soared from $2 a share to $10 a share. On March 10, Jay Sayler, an E-Pawn insider, sold 480,000 shares for roughly $3.7 million.
In the following weeks, E-Pawn.com's stock shed value, and now trades at less than $1.50 a share.
Even amid the hyperactive hype of the Internet, Wamex's announcements have been irrationally exuberant. On May 25, the firm, which describes itself as an "Internet and technology company," issued a release announcing it had "entered into negotiations with a financial portal." But it neglected to say which one.
On June 14, in a release apparently unrelated to the SEC's announcement, Wamex boasted that it would begin advertising on CNBC, touting an alternative trading system it planned to debut on July 4. The SEC said it hadn't authorized any such system.
The indictments name several members and associates of New York's so-called five families of organized crime, including alleged members of Bonanno and Colombo crime families. The CEO of the Ranch-1 fast food chain was also charged.
The SEC said the charges stemmed from illegal stock touting, known as "pump and dump" manipulation. The apparent centerpiece of the schemes was a company known as DMN Capital Investments, which promised development advice and stock promotion to early and middle stage, or mid-cap, companies. Stocks would be touted on various Web sites, and dot-com stocks were pitched to investors hoping to take advantage of the Internet boom.
"They go wherever the money is," said U.S. Attorney Mary Jo White.