Three South Florida men have been arrested as part of a ring of cannabis stock manipulators by the Northern Ohio Department of Justice.
Charles Vaccaro, Eli Taieb, and Dror Svorai were all charged with securities fraud, wire fraud, and conspiracy after two FBI agents went undercover posing as bad actors willing to funnel the trio’s illegal stock gains back into their U.S. bank accounts.
All three men were released on million-dollar secured bonds and Taieb and Svorai had to turn over their passports. Svorai was assigned a GPS tracking ankle bracelet.
The scheme involved the men using private investment companies they owned to make PIPE investments in the stocks eventually owning up to around 20% of the company. PIPE’s are a public investment in a private entity achieved through making a debt investment that converts to common stock when the company can’t pay the high-interest loan. It’s often known as death spiral investing because the conversion rates enable the investors to get millions of shares with relatively small investments. By operating in this fashion the three men investing as an undisclosed group means that public shareholders cannot see how much ownership control of the stock they really have.
Charles Vaccaro first made contact with the undercover FBI agent in July 2019 when he said he was looking for someone to help them liquidate around $100 million in stock in multiple companies and it had to be processed in a foreign brokerage account because the Securities and Exchange Commission was getting tougher on U.S. broker-dealers liquidating large blocks of penny stock.
All three companies traded on what is known as the OTC Markets. The FBI affidavit filed in federal court says Eli Taieb told the undercover agent they would spend $100,000 to $200,000 on paid promoters to pump the stock once their shares converted.
The idea was that the FBI agent(s) would sell their shares at the height of the pump with the goal of liquidated $1 million shares a week and take a 20% clearing fee. Then the FBI agent was supposed to launder the remaining profits into nominated U.S. bank accounts. One of the bank accounts set up to receive the illicit funds was a Well Fargo account for D&D Capital, a company owned by Dror and his brother Dekel.
Published: August 22, 2019
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