CO2 Tech's Ricci criminally charged in Florida
2012-01-25 14:22 ET - Street Wire
Also Street Wire (U-*SEC) U.S. Securities and Exchange Commission
by Mike Caswell
stockwatch.com
Prosecutors in the Southern District of Florida have filed criminal charges against former Pacific International Securities Inc. broker David Ricci, 39, for his role in the CO2 Tech Ltd. market manipulation. In an information sheet filed in federal court on Monday, Jan. 23, the government claims that he helped dump millions of CO2 Tech shares at artificially inflated prices.
The criminal charges come almost one year after federal prosecutors indicted several others for the CO2 Tech manipulation, including recidivist securities violator Jonathan Curshen. The government claimed that Mr. Curshen and the others were part of a 2007 scheme to boost CO2 Tech with false claims about a pollution control product in which Boeing had purportedly taken an interest. The men pumped the stock to $1.65 and obtained $7-million in illegal profits, according to prosecutors. (All figures are in U.S. dollars.)
Mr. Ricci's role in the manipulation, according to Monday's information sheet, was to help with the trading part of the scheme. He boosted the stock with wash trades and helped sell millions of shares while CO2 Tech touted its purported Boeing relationship, prosecutors claim. The charges he faces are conspiracy to commit securities fraud, wire fraud and mail fraud. The maximum sentence is five years.
While Mr. Ricci has not yet entered a plea, it appears he will not contest the case. Last week he finalized a settlement with the U.S. Securities and Exchange Commission in a parallel civil case, agreeing to a penny stock ban and to an order barring future violations. As part of that deal he also agreed to plead guilty to criminal charges, with the plea to be entered by April 30, 2012.
SEC's complaint
The charges Mr. Ricci faces are best described in a civil complaint the SEC filed against him and others on Feb. 18, 2011. According to the complaint, the scheme took place in 2007 when Mr. Ricci was a trader at Red Sea Management Ltd., a Costa Rican company founded by Mr. Curshen that catered to those looking to run a pump-and-dump. Its services included market manipulation, money laundering, incorporating shell companies and establishing virtual offices. The SEC said it carried out these activities through a labyrinth of nominee brokerage and bank accounts.
The CO2 Tech manipulation came about when two Israeli men, Ariav Weinbaum and Yitzchak Zigdon, enlisted Red Sea to help promote the company, the complaint stated. The men held CO2 Tech's entire public float of 22.5 million shares through nominees, and were looking to sell massive quantities of that stock to the investing public. Mr. Curshen agreed to take them on as clients, with full knowledge of their level of control over the company, the SEC said.
The actual promotion began on Jan. 29, 2007, when CO2 Tech started issuing news in which it claimed to have been developing pollution control technology for over a decade. The news releases contained a number of misrepresentations, according to the complaint. The company said it had an office in London, but the office was just a mail drop. The company also said it had a manufacturing operation in Israel, but authorities in that country were unable to find the operation.
The Boeing news came on Jan. 30, 2007, when CO2 Tech said that the airplane manufacturer had taken an interest in one of its products. According to the complaint, the release was plainly false, as there was no arrangement or even any communication between CO2 Tech and Boeing. The only communication was a cease-and-desist letter Boeing sent to CO2 one week after the news release.
As the news releases and related spam were going out, Mr. Curshen and Mr. Ricci carried out a series of wash trades to help "jump-start" the stock, the SEC said. On the day of the Boeing release, they executed trades at gradually increasing prices and then, as buyers entered the market, they started dumping shares. That day the stock went from 91 cents to $1.65 on volume of 12.2 million shares. Mr. Ricci, Mr. Curshen and others were able to generate $5.5-million in profits for Mr. Weinbaum and Mr. Zigdon on that day alone, the SEC claimed.
The complaint sought disgorgement of ill-gotten gains, appropriate civil penalties and penny stock bans. In filing the case, the SEC acknowledged the assistance of the B.C. Securities Commission, the Costa Rican Police, the Israel Securities Authority, the United Kingdom Financial Services Authority and the City of London Police.
While Mr. Ricci will likely plead guilty to the criminal charges, Mr. Curshen is fighting them. Prosecutors claim that he fraudulently promoted several stocks through Red Sea, including CO2 Tech, and funnelled $91.5-million through an account at HSBC Bank in Vancouver, most of which represented the proceeds of the pump-and-dumps.
He pleaded not guilty, but has subsequently been jailed for 16 months in another case. (He tried to bribe corrupt brokers to buy shares of a Washington State company, Industrial Biotechnology Corp. It turned out the man purporting to represent the brokers was an undercover FBI agent. Mr. Curshen pleaded guilty to those charges in June, 2009, and received his sentence in October, 2011.)
The two Israeli defendants, Mr. Weinbaum and Mr. Zigdon, also face criminal charges but have not yet made an appearance. Mr. Weinbaum has not been arrested, and Mr. Zigdon is in custody in Germany awaiting extradition. Both men have responded to the SEC case, in which they are also defendants, and generally deny any wrongdoing.
When he was in Vancouver, Mr. Ricci worked at PI for five years, leaving the firm on Nov. 17, 1999.
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