Updated Wednesday, Feb. 2, 2011 at 9:49 a.m. EST
A New York broker has been indicted for his role in an international spam pump-and-dump stock scheme, prosecutors announced Tuesday.
Gregg Berger, 47, of New York, a former trader at Gilford Securities, was charged with one count of conspiracy to commit securities and wire fraud for participating in a conspiracy to convert thinly traded and low-value Chinese and Israeli stocks into millions of dollars in cash, according to an indictment unsealed Tuesday. If convicted, Berger faces up to 25 years in prison and a fine of $250,000.
As the scheme played out from January 2005 through December 2007, Berger allegedly led the sale of about 30 million shares of stock, generating approximately $30 million for co-conspirators and more than $600,000 in commission for himself.
Pump-and-dump schemes involve the manipulation of the price and volume of a particular stock so the shares can later be sold at an inflated price. False and misleading spam typically is used to tout the stock and encourage unwitting individuals to buy it, which also drives up the share price. Perpetrators then profit by “dumping,” or selling, their shares at the newly inflated prices.
Berger is scheduled to be arraigned on Feb. 18 in U.S. District Court in Detroit. He plans to plead innocent, his Michigan-based lawyer, Mark Satawa told SCMagazineUS.com in an email Tuesday.
“He had an opportunity to plead guilty like everyone else, he refused to do so because he is innocent of the charge,” Satawa said. “He looks forward to answering these charges in court, and to the criminal justice system fully vindicating his alleged role in this scheme.”
According to the indictment, Berger conspired with spam magnate Alan Ralsky, who was sentenced in 2009 to 51 months in prison for running a prolific pump-and-dump outfit.
Berger acted as the racket's stock broker, prosecutors said. He established accounts for trading the targeted stocks, then executed trades at the direction of co-conspirators and transferred them their "profits."
The stocks that were artificially inflated and subsequently sold by members of the conspiracy included China World Trade Corp., Pingchuan Pharmaceutical, China Digital Media Corp., Worldwide Biotech and Pharmaceutical Co., China Mobility Solutions and m-Wise.
Meanwhile, the U.S. Securities and Exchange Commission on Tuesday filed civil fraud charges against Berger, in addition to seven other individuals and three companies involved in the scheme.
Three others have also been previously convicted and sentenced for their roles in the scheme. Ralsky's son-in-law, Scott Bradley, received 40 months in prison in 2009 and Francis Tribble and How Wai Hui each received 51 months in prison.