TSX-V's Global client Elgindy facing asset forfeitures
2005-10-03 15:34 ET - Street Wire
by Stockwatch Business Reporter
The U.S. Department of Justice is seeking $11.8-million in assets belonging to California short seller Amr I. Elgindy, also known as Anthony Elgindy. In a New York court filing last week the department asked for more time to assemble the paperwork necessary to claim Mr. Elgindy's considerable assets as the proceeds of crime. (All figures are in U.S. dollars.)
Mr. Elgindy, a former client of Vancouver firm Global Securities Corp., is in a New York jail awaiting sentencing on securities fraud and extortion charges, among other things, for a scheme in which Mr. Elgindy obtained confidential FBI information on several companies and shorted them while spreading the negative information through two websites he controlled.
The list of stocks Mr. Elgindy shorted, provided by the DOJ to support its forfeiture claim, is an interesting read. It includes well-known U.S. names like ImClone Systems Inc. and lesser-known names like former Howe Street promotion Nano World Projects Corp.
Mr. Elgindy was found guilty on 10 counts of a 32-count indictment earlier this year after a 12-week jury trial. Also found guilty was his co-accused, former FBI agent Jeffrey A. Royer, who provided much of the confidential information used by Mr. Elgindy.
Mr. Elgindy's indictment
Mr. Elgindy's short-selling scheme came to an end back in May, 2002, when the U.S. Department of Justice arrested him for fraud, alleging he successfully shorted several companies while decimating their prices by distributing confidential FBI information. The shorting was done at least partly through Vancouver brokerage Global according to the indictment.
"Elgindy initially communicated negative news about the Targeted Companies and his short selling recommendations to the subscribers of AnthonyPacific.com, who paid him up to $600.00 per month, so that these subscribers would have the opportunity to short sell stocks before the public release of Elgindy's recommendations," the indictment read.
Mr. Elgindy's subscribers took the information and posted it in chat rooms and other websites to exaggerate downward pressure on the companies involved.
In some cases, Mr. Elgindy and his co-accused would even report the negative information to the U.S. Securities and Exchange Commission to "hasten regulatory and law enforcement action, which they knew would cause the stock prices to fall sharply once such action became public."
The coveted information Mr. Elgindy gleaned from the FBI came mostly from one of his co-accused, Mr. Royer, a former FBI agent in Oklahoma.
"Royer obtained the information ... from the FBI's National Crime Information Center database, which contained confidential criminal history information, and the FBI's Automated Case Support database, which contained confidential criminal investigation information," the indictment read.
Mr. Elgindy eventually established such a strong reputation for being able to decimate a stock that he was able to extort free shares from several companies in return for a promise to leave that company out of his shorting scheme.
"Sometimes extortionate demands were coupled with threats to report a company's activities to the SEC or FBI," the indictment read.
There was no indication in the indictment that Global had any idea what Mr. Elgindy was up to.
The proceeds of crime
The Department of Justice, now that it has won its case, is trying to secure Mr. Elgindy's sizable bank account and his home in California as the proceeds of crime.
In a 47-page memorandum supporting the forfeiture the DOJ provides a list of companies Mr. Elgindy shorted and how much money he made shorting them.
The ImClone shorting
It turns out one of Mr. Elgindy's more profitable shorts was ImClone Systems, the subject of home decorating diva Martha Stewart's legal troubles. ImClone shorts netted Mr. Elgindy $516,511 over his two-year shorting scheme according to the DOJ.
Ms. Stewart was convicted for for lying about her sale of $228,000 worth of ImClone shares in December, 2001. Shortly after Ms. Stewart sold, the company tumbled when it disclosed government rejection of one of its drugs.
Mr. Elgindy, apparently a better trader than Ms. Stewart, was shorting the stock as early as February, 2000, through to May, 2002.
Canadians on the shorting list
The Canadian companies on the list include Micromem Technologies Inc., once a high-flying Winnipeg Stock Exchange promotion, whose press releases are compendiums of technical jargon. Micromem shorts apparently made Mr. Elgindy $272,297.
The smaller players on the list include Nano World Projects Corp., a promotion run by Howe Streeters Robert Papalia and David Hunter that resulted in market manipulation prosecutions in both Canada and the United States against Mr. Hunter and Mr. Papalia.
Mr. Elgindy's Nano World profits, $45,270, came between April 11, 2000, and July 6, 2000, as the stock fell from its $24.50 high to $5.50. There was no indication Mr. Elgindy ever worked with Mr. Papalia and Mr. Hunter, who were accused of manipulating the stock up, not down.
Another smaller player on the list was Freedom Surf Inc., a U.S. market manipulation in which convicted fraudster Allen Wolfson used accounts at Canaccord Capital Corp., Union Securities Ltd. and Rampart Securities Inc. to manipulate the stock to $40. There was no indication the Canadian brokerages were anything other than innocent conduits, nor was there any indication Mr. Elgindy worked with Mr. Wolfson.
Like Mr. Papalia and Mr. Hunter, Mr. Wolfson was accused of manipulating the stock up, not down.
Mr. Elgindy apparently made $40,452 shorting Freedom Surf.
The unprofitable short
Not all of Mr. Elgindy's shorting was profitable, however. His worst performer was GenesisIntermedia Inc., a California marketing company, which cost Mr. Elgindy $707,446 in shorting losses.
Mr. Elgindy shorted the stock numerous times starting in December, 2000, but the pesky stock kept rising, going from $5.91 on Dec. 15, 2000, to $18.77 by June 28, 2001, after adjusting for splits.
Over all, however, the DOJ says Mr. Elgindy's shorting was profitable enough that he should forfeit his house plus $11,850,909.
Mr. Elgindy, meanwhile, is detained in the Metropolitan Correctional Center in New York awaiting sentencing for both the short selling scheme and unrelated charges of boarding an airline using fake identification. |
