Fourteen alleged fraudsters were accused Wednesday of operating a $147 million pump-and-dump stock scheme out of two so-called “boiler rooms” on Long Island, and using high-pressure sales tactics to bilk mostly elderly victims out of $10 million.
In a Brooklyn federal court indictment and a Securities and Exchange Commission suit, the government said that from phone banks in Plainview and Melville the 14 — including 10 Long Islanders — manipulated stock prices and then used lies, harassment and threats to bully their customers.
“I am tired of hearing from you,” one salesman allegedly told a victim who called to complain about his losses. “Do you have any rope at home? If so tie a knot and hang yourself or get a gun and blow your head off.”
The criminal indictment charged four out-of-state corporate insiders who supplied thinly-traded public stocks to the alleged schemers, as well as boiler-room managers and cold-call salesmen, with conspiracy, securities fraud, wire fraud and money laundering.
“The defendants designed an elaborate, fraudulent scheme to defraud the investing public, preying in particular upon unsuspecting and elderly investors,” said Brooklyn acting U.S. Attorney Bridget Rohde.
The 10 New York defendants all pleaded not guilty in court appearances. The two managers of the alleged Melville boiler room — Erik Matz, 44, of Mount Sinai, and Ronald Hardy, 42, of Port Jefferson — were detained. The other eight were released on bail.
The SEC civil complaint named 11 of the same individuals among 13 defendants, and also cited 27 so-called “relief defendants” who profited from the scheme, and sought disgorgement of $14 million in profits, injunctions and civil penalties for fraud and market manipulation.
SEC officials said the case should serve as an object lesson to investors.
“If you receive a phone call from a high-pressure salesperson who uses harassment and threats to get your business, hang up,” said Lori Schock, director of the agency’s investor education office.
Descriptions of the two boiler rooms operations — one in Melville called My Street Research and Power Traders Press, the other in Plainview called Elite Stock Research — evoked memories of the infamous 1990s pump-and-dump schemes led by “Wolf of Wall Street” Jordan Belfort.
The government charged that the corporate insiders — called “orchestrators” by the SEC — provided publicly traded penny stocks at below-market value and paid the boiler rooms to execute the schemes, artificially “pumping” up the price through trading while priming customers for the “dump.”
Between 2014 and 2017, the SEC said, the Long Island call centers were used to make hundreds of thousands of cold calls. Elite, allegedly managed by Anthony Vassallo, 54, of Farmingdale, had 19 phone lines, and My Street had 20 to push penny stocks through pressure and tall tales.
In one pitch, the government alleged, one salesman pushed a media/internet penny stock by claiming falsely that the Walt Disney Co. was planning to buy in, and another compared a stock to the Twitter initial offering, suggesting the price would escalate, when it was already artificially high.
“In a typical phone call,” the government said, “telemarketers would direct victims to place trades and tell them how many shares to purchase and at what price. With this information about the victims’ trades, the orchestrators and the boiler room sales personnel allegedly placed opposing sell orders to dump their own shares.”
The criminal case focused on manipulation of five stocks — National Waste Management Holdings, CES Synergies, Grilled Cheese Truck, Hydrocarb Energy Corp., and Intelligent Content Enterprises.
The government said more than 100 investors nationally lost money. In some cases, the boiler room even charged victims “subscription fees” to receive their stock recommendations, according to the criminal complaint.
The government said the four out-of-state corporate insiders and marketers charged criminally in the scheme — Jeffrey Chartier, 53, of Los Angeles; Stephanie Lee, 46, of St. Petersburg, Florida.; Lawrence Isen, 63, of San Diego; and Robert Gleckman, 52, of the Tarzana neighborhood of Los Angeles — were in custody and would be brought to Brooklyn.
In addition to Hardy, Matz, and Vassallo, the Long Island defendants include Brian Heepke, 36, of Farmingdale, who allegedly made the “hang yourself” remark.
Also charged were Dennis Verderosa, 67, of Coram; Emin Cohen, 33, of Coram; Macarthur Jean, 34, of Dix Hills; Robert Gilbert, 51, of Cold Spring Harbor; and Sergio Ramirez, 44, of East Meadow; and Paul Ewer, 36, of Massapequa.
No defense lawyers commented outside of court except for John Wallenstein, Ewer’s attorney, who said his client never knew “anything wrong” was going on.