Red Sea Management Ltd., a San José-based firm, is in trouble again with U.S. stock regulators and the U.S. Justice Department.
The security and Exchange Commission has filed a civil complaint in which it alleged that Red Sea ran a $7 million, international pump-and-dump fraud with the stock of a sham company that purported to provide products and services to fight global warming.
The Department of Justice also announced criminal indictments against six of the defendants.
The commission filed a complaint against:
* Jonathan R. Curshen, 46, a Sarasota, Florida resident who allegedly founded and led Red Sea Management Ltd., a Costa Rican asset protection company that, according to the complaint, effected pump-and-dump schemes on behalf of its clients and laundered millions of dollars in trading proceeds out of the United States to its clients;
* David C. Ricci, 39, and Ronny Morales Salazar, 39, of San José, whom the complaint describes as Red Sea stock traders;
* Ariav “Eric” Weinbaum, 37, and Yitzchak (or Izhack) Zigdon, 47, of Israel, allegedly two of Red Sea’s clients;
* Robert L. Weidenbaum, 44, of Coral Gables, Florida, allegedly a stock promoter who operates a company called CLX & Associates, Inc.; and
* Michael S. Krome, 49, a Lake Grove, New York lawyer, who allegedly wrote a fraudulent opinion letter.
In an unrelated criminal case, Curshen pled guilty to conspiracy to commit securities fraud and commercial bribery, the commission said in its civil complaint. He is free on conditional release pending his sentencing. In an unrelated civil enforcement action brought by the commission, he was found liable after trial for violations of the anti-fraud provisions of the federal securities laws, the commission said. The evidence showed that he anonymously posted baseless financial projections and other information about an issuer on Internet sites,
failed to disclose that he was paid to promote the issuer, and sold the issuer’s stock at the same time he touted it, the stock regulating agency said.
“This group of illicit stock promoters sought to hide their scheme behind offshore entities, but their misconduct was exposed by the excellent cooperation of law enforcement agencies here and abroad,” said Cheryl Scarboro, associate director in the commission’s Division of Enforcement.
The fraudulent pump-and-dump scheme involved the common stock of CO2 Tech Ltd. that was carried out from late 2006 through April 2007. According to the complaint, the defendants’ coordinated misconduct enabled them to sell CO2 Tech stock at artificially inflated prices, resulting in profits of over $7 million. Ricci has offered to settle in a consent submitted for the court’s consideration, the commission said.
As a result of a false media campaign and the manipulated orders, the market price of CO2 Tech stock increased from 91 cents per share at the market’s close on Jan. 29, 2007, to $1.65 per share at the close on Jan. 30 – an increase of 81 percent in one day. The trading volume increased from 729,100 shares on Jan. 29 to 12,204,700 shares on Jan. 30 – an increase of 1,573 percent, said the commission.
In the related criminal action, the U.S. Attorney’s office in south Florida said indictments sought by the Justice Department’s Criminal Division were unsealed against Curshen, Krome, Salazar, Weidenbaum, Weinbaum, and Zigdon. The defendants are charged in the Southern District of Florida variously with conspiracy to commit securities, mail and wire fraud; wire fraud; mail fraud; violating the securities regulation laws and obstruction of justice, said the U.S. Attorney’s Office.
According to the U.S. Attorney’s Office, CO2 Tech promoters purported that the firm had a business relationship with Boeing to reduce polluting gases emitted from airplanes. The indictment alleges that these relationships never existed.
Red Sea shared office space in Edificio Colón in San José with Sentry Global Securities, another firm named in the indictments. Some U.S. expats were employed or otherwise associated with Red Sea during the period outlined in the indictments.