Re: 6/30/03 - [Elgindy] USA Today: Short seller now faces more charges
Short seller now faces more charges
By Greg Farrell, USA TODAY
NEW YORK — Prosecutors have added new charges to their case against a well-known Internet-based short seller, Amr "Tony" Elgindy, and accused a hedge fund manager of being part of the alleged conspiracy.
In a superseding indictment Monday in Brooklyn, prosecutors added Jonathan Daws, a former fund manager at Gryphon Partners as a defendant.
In May 2002, prosecutor Kenneth Breen accused Elgindy and an alleged confederate, Derrick Cleveland, of getting tips from an FBI agent about companies that were being investigated by federal authorities. Elgindy and his partners would then allegedly sell stock in those companies short — a bet on a falling price — based on the inside information.
Weeks after taking the short positions, Elgindy would launch short-selling attacks on these companies by posting damaging information on his Web site, where he operated under the name "Anthony Pacific." Cleveland pleaded guilty to one charge and began cooperating with the government last year.
The new indictment alleges that in an Internet chat room on Jan. 12, 2001, Elgindy discussed the FBI investigation of a company and told his subscribers not to discuss the matter publicly, warning that, "If you do you will be pros(ecuted)." Elgindy has pleaded not guilty. His lawyer, Gerald Lefcourt, will argue that his client's words were part of the overheated rhetoric of Internet chat rooms.
The new indictment also accuses Daws, who used to manage the Gryphon Master Fund, of participating in the scam by shorting large blocks of stock in targeted companies at the same time as Elgindy.
Daws pleaded not guilty Monday. His lawyer, James Benjamin Jr., said his client "did not know of the allegedly corrupt origins of securities-related information that was provided to him."
Daws left Gryphon last year. Gryphon issued a statement saying, "The news of this action against a former employee is, of course, unfortunate. We have informed our investors of the matter, and have worked with the authorities investigating the case."
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