January 24, 2014
Contact: Timothy P. McMahon
Phone Number: (973) 776-1100
Leader Of "Pump And Dump" Stock Fraud Scheme Sentenced In Manhattan Federal Court To Nine Years In Prison
NEW YORK - Carl J. Kotowski, Special Agent in Charge of the Drug Enforcement Administration's New Jersey Division, and Preet Bharara, the United States Attorney for the Southern District of New York, announced that David Levy was sentenced today to nine years in prison after having been found guilty by a federal jury for orchestrating "pump and dump" stock fraud schemes that employed the Internet and social networking sites, among other tools, to manipulate the price of penny stocks as well as participating in an international money laundering scheme. David Levy was sentenced in Manhattan federal court by U.S. District Judge Paul A. Crotty who also presided over the three-week jury trial. David Levy's wife and co-defendant, Donna Levy, who also was found guilty by the federal jury for her role in this and other schemes, is scheduled to be sentenced by Judge Crotty on February 5, 2014.
Manhattan U.S. Attorney Preet Bharara said: "With today's sentence David Levy will now pay a heavy price for the massive 'pump and dump' schemes that he and his wife orchestrated, which defrauded multiple victims of millions of dollars - the loss of his liberty."
According to the evidence introduced at trial, court filings, and statements made in court:
The Start-Up Company Stock Fraud Scheme
The scheme worked as follows: David Levy and Donna Levy offered to help start-up companies obtain financing, take the start-up companies public, and coordinate marketing and investor relations for the companies, in exchange for company shares. Once they had helped the companies go public, Donna Levy put out press releases on behalf of the target companies, and she worked with her husband to secretly fund and distribute misleading third-party "buy" recommendations concerning the targeted companies. This misleading promotional campaign, along with other manipulative conduct, generated demand for stock in the targeted companies, and caused the price of the stocks to rise. David Levy, Donna Levy, and their co-conspirators took advantage of the "pumped-up" stock trading volume and price to "dump" their shares into the market until the misleading promotional campaign had run out of steam. They would repeat the scheme multiple times until the target companies' shares were essentially valueless, thereby harming company founders and executives, as well as innocent investors who bought in reliance on the misleading promotional campaigns orchestrated by David Levy and Donna Levy. David Levy was convicted of engaging in this pump and dump scheme with three companies that he helped take public: Cardiac Network, Inc., which has traded under symbol "CNWI", Banneker, Inc., which has traded under symbol "BANI," and Greenway Design Group, Inc., which has traded under symbol "GDGI."
The International Money Laundering Scheme
David Levy also was convicted of a money laundering conspiracy in connection with his efforts to conceal more than $2.3 million in proceeds of the fraudulent schemes in Panamanian shell company bank accounts maintained by a co-conspirator at a bank in Panama. In connection with the scheme, David Levy wire transferred $150,000 in fraud proceeds to a Panamanian shell company bank account through a bank account in New York. David Levy carried more than $2 million in cashier's checks, representing proceeds from stock fraud, to Panama and caused them to be deposited into the shell company bank accounts.
Nine additional defendants already have pled guilty to charges arising out of the conduct described in the Indictment, and five of the nine have been sentenced.
In addition to the prison sentence, Judge Crotty sentenced David Levy, 61, of Fort Lauderdale, Florida, to three years of supervised release and ordered him to pay a $500 special assessment fee. In addition, David Levy was also preliminarily ordered to forfeit $12 million, his home in Florida, certain luxury vehicles, and certain bank accounts.
This case originated and the schemes were uncovered as part of the Government's long-term investigation into criminal conduct at the Port of New York-New Jersey. Mr. Bharara thanked the Internal Revenue Service-Criminal Investigations' New Jersey office, as well as the other participants in the High Intensity Drug Trafficking Area Task Force, which includes the Drug Enforcement Administration and Homeland Security Investigations' New Jersey Offices, for their assistance with the investigation. Mr. Bharara also thanked the Securities and Exchange Commission and the Financial Industry Regulatory Authority for supporting the investigation, which is ongoing.
The prosecutions are being handled by the Office's Public Corruption Unit. Assistant United States Attorneys Howard S. Master and Carrie H. Cohen are in charge of the prosecutions.