April 10, 2018
In 2015, the SEC charged several individuals with securities fraud, mail fraud, and wire fraud in connection with a $300 million market manipulation scheme. Recently, Craig Josephberg, a registered broker with Halcyon Cabot Partners Ltd. and Meyers Associates LP, admitted that from March 2013 through July 2014, he knowingly agreed to participate in this scheme.
The stock manipulation scheme involved Darren Ofsink, a New York attorney and founder of Ofsink LLC; Michael Morris, managing director of Halcyon Cabot Partners, Ltd. and registered broker; Darren Goodrich, a registered broker; Abraxas (“AJ”) Discala, Chief Executive Officer of OmniView Capital advisors LLC; Ira Shapiro, Chief Executive Officer of CodeSmart Holdings, Inc.; Kyleen Cane, a Las Vegas attorney and managing partner of Cane Clark LLP; and several others.
Josephberg admitted to being involved in this elaborate pump-and-dump scheme, where he and others involved teamed up to artificially inflate the price of CodeSmart Holding’s stock and profit at the expense of the brokers’ customers. According to Josephberg’s FINRA BrokerCheck report, the alleged schemers “acquired 3 million restricted shares of the company stock following its reverse merger into a public shell company in May 2013, and improperly flood[ed] the market with the shares as though they were unrestricted.” Further, CodeSmart’s CEO, Ira Shapiro, and the other alleged schemers launched a promotional campaign, among other things, to hype the stock and encourage the brokers’ clients to invest. According to the SEC’s Complaint, Shapiro received millions of dollars in illicit gains, while Josephberg and the other brokers involved made over $500,000 each.
According to BrokerCheck, they most recently engaged in manipulative trading of two other penny stock companies. The SEC reports that they exchanged a series of text messages openly discussing coordinating their trading in these securities to create a false impression of market activity and contemplated that one company had the potential to be an even more profitable scheme than CodeSmart.
This case is a result of the Financial Fraud Enforcement Task force (FFETF), created in 2009 by the Obama administration to improve efforts across the government and with state and local partners to investigate and prosecute significant financial crimes and address financial discrimination in the lending and financial markets.