A Texas man was convicted Wednesday for his role in a $147 million stock-fraud scheme that cheated investors nationwide and was based out of Melville, federal officials said.
Following a three-week trial in federal court in Central Islip, a jury convicted Michael Watts, 63, of Sugarland, Texas, of conspiracy to commit securities fraud, securities fraud, conspiracy to commit wire fraud, money laundering conspiracy and money laundering, according to officials for the U.S. District Court for the Eastern District of New York. Watts was found guilty on all counts and faces up to 20 years in prison, authorities said.
Watts, a former registered broker and a large shareholder in Hydrocarb Energy Corp., illegally inflated the price of the stock and then sold for profit more than $2 million worth of Hydrocarb and other shares that he owned or controlled on unsuspecting investors in the months leading to the company’s bankruptcy in April 2016, authorities said.
The practice is known as a “pump-and-dump” scheme, prosecutors said. Watts and some co-conspirators used a “boiler room” in Melville as a call center where vulnerable investors, many whom were elderly, were targeted through cold calls using “lies and high-pressure sales tactics to lure victim investors,” officials said.
“With today’s verdict, the jury has delivered a measure of closure to the victims, many of them elderly and vulnerable, who were preyed upon by Watts and his co-conspirators," said Richard P. Donoghue, U.S. Attorney for the Eastern District.
Watts’ attorney, Joseph W. Ryan Jr., said in a statement: "The jury wrongfully convicted an innocent man who lost $15 million dollars in the oil venture which was the subject of the stock at issue. Mr. Watts looks forward to his vindication on appeal."
Ryan said Watts' sentencing is scheduled for Feb. 21.
More than a dozen defendants, most of them from Long Island, were indicted in the scam in July 2017. Others charged operated out of Los Angeles, San Diego, and St. Petersburg, Florida.
In addition to the boiler room in Melville, called My Street Research and Power Traders Press, some defendants also worked from a boiler room in Plainview called Elite Stock Research, officials said.
Federal prosecutors allege Watts and other defendants manipulated four other publicly traded stocks in addition to Hydrocarb that also included National Waste Management Holdings, CES Synergies, Grilled Cheese Truck, Hydrocarb Energy Corp. and Intelligent Content Enterprises.
Watts is the 13th defendant convicted in the case. Four defendants have been sentenced, they include: Emin L. Cohen, of Coram, who was sentenced to 2 years in prison, MacArthur Jean of Dix Hills, who was sentenced to 4 years, Dennis Verdosa of Coram, who was sentenced to 6 years and Ronald Hardy of Port Jefferson, who was sentenced to 10 years, authorities said.