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The SEC sued an attorney and three others over their alleged roles in a $34 million international scheme to manipulate the stock of medical firm Biozoom Inc.
Vancouver-based attorney Faiyaz Dean, Francisco Abellan Villena, Guillermo Ciupiak, and James B. Panther Jr. “played an integral role” in the scheme, according to a May 15 Securities and Exchange Commission complaint in the U.S. District Court for the Southern District of New York..
Abellan and Ciupiak allegedly masterminded the fraud. Panther created accounts, facilitated Biozoom stock trading, and created a campaign to promote the scheme, according to the complaint. Dean allegedly purchased stock for Abellan and Ciupiak while disguising their control over it. He also helped Panther create brokerage accounts, the complaint said.
The four defendants allegedly “hid their ownership and sales of Biozoom shares by using offshore bank accounts, sham legal documents, a network of nominees, anonymizing techniques, and other deceptive practices,” the SEC said in a statement.
Panther “intends to defend himself against the allegations in the SEC complaint,” Russell Duncan, his attorney, told Bloomberg Law. Duncan is based in Potomac, Md., and chair of Shulman Rogers Gandal Pordy & Ecker P.A.'s White Collar, Securities Enforcement, and Government Investigations group.
“My office is reviewing the complaint and has no comment at this time,” Michael Bachner, Dean’s New York-based attorney, told Bloomberg Law.
Attorneys for Villena and Ciupiak couldn’t be identified for comment.
The defendants used shell companies to artificially drive up demand for Biozoom stock, according to the complaint. Dean allegedly hid Abellan and Ciupiak’s ownership of a shell company by putting the shares in the names of Argentine nationals who didn’t have any actual economic interest in the stock. He also falsified documents to hide the fact that the shares couldn’t be freely resold, the complaint said.
“Manipulative and deceptive conduct undermines the integrity of our markets,” Antonia Chion, an SEC Enforcement Division associate director, said in a statement. “The charges announced today demonstrate our commitment to unraveling even the most sophisticated international schemes that exploit retail investors.”
Two related SEC administrative actions settled May 15. Timothy Scarpino agreed to bars on participating in penny stock offerings and associating with broker-dealers for his role in unregistered Biozoom stock sales. Mark A. Karow and Legend Securities Inc. agreed to similar bars, a censure, and about $94,000 in disgorgement and fines for unregistered sales and supervisory and recordkeeping failures. In settling, the defendants neither admitted nor denied wrongdoing.
The SEC in 2013 received a court order freezing proceeds from the unlawful sales of Biozoom stock. The agency then got a default judgment and has to date returned $14 million to investors. The SEC in 2017 sued and later barred a different attorney for helping Biozoom’s predecessor entity with the fraud.
The case is SEC v. Villena , S.D.N.Y., No. 1:18-cv-04309, complaint filed 5/15/18 .
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