Re: 5/23/02 - [Elgindy] USA Today: Stock scam allegedly abuses FBI database
05/23/2002 - Updated 08:44 AM ET
Stock scam allegedly abuses FBI database
By Adam Shell, USA TODAY
NEW YORK — The FBI, already under fire for intelligence failures related to Sept. 11, got more bad news Wednesday: A special agent and former agent were indicted for allegedly helping a Web stock tout pull off an insider-trading scam.
Prosecutors charged agent Lynn Wingate and Jeffrey Royer, a former agent who quit in December, with lifting damaging information on public companies from confidential FBI databases and giving it to trader Amr "Tony" Elgindy.
Elgindy, the alleged mastermind of the scheme, profited from the leaks by "shorting" the stocks of the targeted companies through a Canadian brokerage firm. He then launched smear campaigns via Internet sites he ran in an attempt to drive the stock prices down and inflate his profits. (In a short sale, an investor sells borrowed stock with the hope of buying it back later at a lower price.)
"The allegations reveal a shocking partnership between an experienced stock manipulator and law enforcement agents," says U.S. Attorney Alan Vinegrad.
The indictment included charges of insider trading, extortion and obstruction of justice.
As payment for sharing the inside secrets, prosecutors allege that Royer, while still working for the FBI, received $30,425 in four wire transfers in 2000 and 2001 from Elgindy's associate, Derrick Cleveland. Troy Peters, who allegedly helped Elgindy manipulate stock prices, was also charged.
In March and April, Wingate accessed the FBI database to see if Elgindy or any of the four other defendants were the subject of an FBI investigation. Royer was also accused of a similar act in October 2001. That resulted in an obstruction of justice charge.
"That a current and former FBI special agent are among the defendants is particularly distressing," says Kevin Donovan, assistant director-in-charge of the FBI investigation in New York.
This isn't the first time Elgindy, who gained a wide following on the Silicon Investor stock chat site under the alias Anthony@Pacific, has run afoul of the law. In May 2000, he was sentenced to four months in federal prison by a Texas judge for felony mail fraud.
Elgindy and Cleveland also allegedly extorted stock from companies in exchange for agreeing to stop their smear campaigns.
Contact information for the defendants was not available Wednesday night. Each could face up to 20 years in prison.
And in a civil forfeiture action, prosecutors are seeking cash from Elgindy's and Royer's bank accounts, as well as Elgindy's Bentley, a Jaguar, a Hummer and his primary residence, bought a year ago for $2.2 million.
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