Stock Broker Pleads Guilty to Microcap Stock Manipulation Scheme
BOSTON – A former New Hampshire stockbroker pleaded guilty today for his role in a market manipulation scheme which was actually part of an undercover operation.
Robert Raffa, 57, of Penacook, NH, pleaded guilty to one count of conspiracy to commit securities and wire fraud, one count of securities fraud, and three counts of wire fraud. U.S. District Court Chief Judge Patti B. Saris scheduled sentencing for Dec. 6, 2017. In April 2016, Raffa and a co-conspirator were arrested and charged in connection with their role in a scheme to manipulate the market for the publicly traded securities of Green Energy Renewable Solutions, Inc., a penny stock company that claimed to be in the business of developing and operating waste processing and recycling facilities near Detroit, MI.
In early 2012, the conspirators used four foreign entities to covertly acquire nearly all of Green Energy’s unrestricted stock without reporting their controlling interest as required by law. They then hired a promoter to send blast e-mails touting Green Energy to potential investors, all while selling shares without disclosing that they had orchestrated the campaign encouraging investors to buy.
The initial promotion enabled the conspirators to sell more than 1.5 million shares of Green Energy stock for proceeds of over $900,000. However, as the conspirators continued to control a substantial amount of Green Energy stock after the promotion ended, they used manipulative trading techniques to stabilize Green Energy’s stock price while they searched for another promoter to run a second touting campaign. Their search led them to a stock promoter who was secretly cooperating with federal agents and an undercover agent who claimed to have access to a network of corrupt stockbrokers who would buy their shares in exchange for kickbacks. Raffa and his co-conspirator executed a trade in which they sold 174,000 shares of their Green Energy stock to an account purportedly controlled a corrupt broker, which was in fact controlled by federal authorities. Following the trade, the conspirators wired a $6,000 kickback payment to an account they believed to be controlled by the corrupt broker, but which was actually controlled by federal authorities.
In a parallel action, the Securities and Exchange Commission (SEC) previously charged Raffa with securities fraud in connection with the scheme.
These charges arose out of a multi-year investigation focusing on preventing fraud in the microcap stock markets. Microcap companies are small publicly traded companies whose stock often trades at pennies per share. Fraud in the microcap markets is of increasing concern to regulators as such markets have proven to be fertile grounds for fraud and abuse. This is, in part, because accurate information about microcap stocks may be difficult for the average investor to find, since many microcap companies do not file financial reports with the SEC.
Today’s charges follow a series of cases filed by the U.S. Attorney for the District of Massachusetts and the SEC in which more than 30 individuals have been criminally charged and convicted for using kickbacks and other schemes to trigger investment in, or manipulate the stock of, thinly-traded stocks.
The charge of conspiracy provides for a sentence of no greater than 25 years in prison, five years of supervised release and a fine of $250,000, or twice the gain or loss. The charge of securities fraud provides for a sentence of no greater than 25 years in prison, five years of supervised release and a fine of $250,000, or twice the gain or loss. The charges of wire fraud provide for a sentence of no greater than 20 years in prison, three years of supervised release, and a fine of $250,000, or twice the gain or loss. Sentences are imposed by a federal district court judge based upon the U.S. Sentencing Guidelines and other statutory factors.
Acting United States Attorney William D. Weinreb and Harold H. Shaw, Special Agent in Charge of the Federal Bureau of Investigation, Boston Field Division made the announcement today. The United States Attorney’s Office received valuable assistance from the SEC. Assistant U.S. Attorney Vassili Thomadakis of Weinreb’s Criminal Division and SEC Attorney Andrew Palid, who was appointed as a Special Assistant U.S. Attorney, are prosecuting this case.
The details contained in the charging document are allegations. The remaining defendant is presumed to be innocent unless and until proven guilty beyond a reasonable doubt in a court of law.