SEC target Curshen receives second lifetime ban
2012-11-02 13:42 ET - Street Wire
Also Street Wire (C-*SEC) U.S. Securities and Exchange Commission
Also Street Wire (U-CTTD) CO2 Tech Ltd
by Mike Caswell
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The U.S. Securities and Exchange Commission has won a permanent penny stock ban and $10.35-million in financial penalties against recidivist securities violator Jonathan Curshen, 47. (All figures are in U.S. dollars.) The sanctions, contained in a default judgment handed down in Miami on Thursday, Nov. 1, stem from the pump-and-dump of CO2 Tech Ltd., a pink sheets company that falsely claimed to have a relationship with Boeing. The SEC said that Mr. Curshen helped dump $7-million worth of stock.
The ban is the second for Mr. Curshen. The SEC previously won a permanent penny stock ban against him for the 2000 pump-and-dump of Freedom Golf Inc., after claiming that he and others dumped over $500,000 worth of stock while posting baseless revenue and profit predictions for the company on-line. (The trial in that case featured testimony from former Union Securities Ltd. employees Trevor Koenig and Joe Fernando, who worked at the firm's controversial White Rock branch.)
The bans may not have much immediate significance to Mr. Curshen, as he is serving a 20-year jail term that he received in a recent criminal case. Prosecutors claimed that he participated in a number of pump-and-dumps, including CO2 Tech. They did not say exactly how much money the schemes made, but said that Mr. Curshen funnelled $91.5-million through an account at HSBC Bank in Vancouver, with most of the money representing proceeds from pump-and-dumps. A Miami jury convicted him on Jan. 31, 2012. He is appealing the conviction.
Witnesses at the criminal trial included former Pacific International Securities Inc. broker David Ricci, who was also a defendant and pleaded guilty early in the case. According to prosecutors, Mr. Ricci worked for Mr. Curshen's company in Costa Rica, and helped him execute a series of wash trades that boosted CO2 Tech. Mr. Ricci is serving an 18-month sentence for his role in the scheme, and is scheduled for release from the Moshannon Valley institution in Pennsylvania on Aug. 31, 2013.
Other prior charges against Mr. Curshen include a criminal conviction for broker bribery. In 2008, New York prosecutors claimed that 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 16 months in jail.
CO2 Tech charges
Full details of the CO2 Tech charges are contained in a civil complaint that the SEC filed in the Southern District of Florida on Feb. 18, 2011. The complaint described Mr. Curshen as the founder of Red Sea Management Inc., a Costa Rican company that specialized in helping those looking to run a pump-and-dump. The SEC said that since founding Red Sea in 1998, Mr. Curshen had used it to launder millions of dollars in illegal trading proceeds for overseas clients.
The CO2 Tech promotion, as described by the SEC, came about in January, 2007, when two Israeli men, Ariav Weinbaum and Yitzchak Zigdon, enlisted Red Sea to help promote the company. (The Israeli men were both defendants as well.) At the time the men held CO2 Tech's entire public of float of 22.5 million shares through nominees, the SEC said.
According to the complaint, the promotion involved issuing bogus news about a deal with Boeing, which coincided with wash trades by Mr. Curshen and others. The company issued the news on Jan. 30, 2007, claiming that Boeing had taken an interest in a pollution control product the company was developing. The release was completely false, the SEC said. The only communication between Boeing and CO2 Tech was a cease-and-desist letter from Boeing that arrived one week after the news release.
As the news went out, Mr. Curshen and Mr. Ricci "jump-started" the stock with a series of wash trades, the complaint stated. On the day of the Boeing news, the men were able to boost the stock to $1.65 from 91 cents on volume of 12.2 million shares. They dumped $5.5-million worth of shares that day, according to the complaint. The SEC listed the total profits from the scheme as $7-million, which Red Sea wired to accounts in Israel and Switzerland.
The complaint sought disgorgement of ill-gotten gains, appropriate civil penalties and penny stock bans against the men. 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.
The SEC has already ended its case against the two Israeli defendants. Mr. Zigdon settled out of court on the eve of trial on terms that have yet to be released. Mr. Weinbaum ignored the case, and the SEC obtained a $10.3-million default judgment against him on Oct. 9, 2012.
Mr. Curshen's SEC penalties were also a decision by default, as he did not respond to many pretrial queries (although he did file a hand-written motion on Oct. 29 asking, among other things, for the court to appoint him a lawyer). His $10.3-million fine includes a $1.3-million civil penalty and disgorgement of $9.05-million in ill-gotten gains, for which he and Mr. Weinbaum are jointly liable.
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