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Regulation and Compliance > Federal Regulation > SEC

Ex-Long Island Broker Pleads Guilty in $147M Stock Manipulation Scam

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One of 16 defendants in a $147 million stock manipulation scheme that preyed largely on the elderly withdrew her not guilty plea and entered a plea of guilty on several counts, according to a document filed Friday in U.S. District Court for the Eastern District of New York in Central Islip, Long Island.

Stephanie Lee, an ex-broker who worked in conjunction with Plainview, New York-based Elite Stock Research; Melville-based My Street Research; and related companies, pleaded guilty to securities fraud and conspiracy to commit securities fraud, money laundering and money laundering conspiracy, wire fraud conspiracy and obstruction of an official proceeding in connection with the sale of the stock of two publicly traded companies, CES Synergies (CESX) and National Waste Management Holdings (NWMH).

The top count to which Lee pleaded guilty carries a maximum sentence of 20 years in prison, Richard P. Donoghue, U.S. attorney for the Eastern District of New York, and William F. Sweeney Jr., assistant director-in-charge of the Federal Bureau of Investigation, New York Field Office, pointed out in announcing Lee’s plea.

Lee agreed to pay a maximum fine of $250,000 as part of a plea agreement, according to a transcript of the Friday plea proceeding that was filed Monday. She also agreed to testify at the upcoming trial Feb. 10, according to the transcript. The hearing took place before United States District Judge Joanna Seybert. Sentencing for Lee is scheduled for July 24.

Between about January 2014 and July 2017, Lee “engaged in a scheme to defraud investors and potential investors in the publicly traded companies NWMH and CESX by, among other things, artificially controlling the price and volume of the traded shares in these companies, and by concealing to the investigating public that while I was selling these shares along with my business partner Jeffrey Chartier, I was in fact an insider of these publicly traded companies,” she admitted during Friday’s hearing, the transcript shows.

As alleged by the SEC in its original case filed against Lee and others July 12, 2017, between 2013 and July 2017, Lee and her co-defendants took part in a scheme to defraud investors, many of them elderly, via the use of high-pressure call centers — commonly referred to as “boiler rooms” —  at Elite and My Street Research.

The defendants “engaged in a series of widespread and ongoing fraudulent schemes” in which they manipulated the price and volume of at least four microcap securities that “reaped at least $14 million in illicit proceeds while causing more than $10 million in losses” to more than 100 victims, the SEC claimed in its suit. The SEC didn’t immediately respond to a request for comment about Lee’s guilty plea.

Criminal charges were also filed against Lee and her co-defendants, who artificially controlled the trading price and volume of publicly traded companies by, among other things, retaining Elite and My Street Research to use pressure tactics, material misrepresentations and omissions to induce victims from around the country to purchase stock, Donoghue said in his office’s announcement on Friday.

Although the victims thought they were buying stock on the open market, Lee and her co-defendants secretly coordinated the trading so the victims purchased shares at inflated prices that were owned and controlled by Lee and certain co-defendants, according to Donaghue. After she was arrested, Lee “gave false information to the FBI agents who interviewed her in connection with the alleged fraud,” Donaghue said.

Lee, a resident of Saint Petersburg, Florida, was the 13th defendant to plead guilty, Donaghue said.A 14th defendant, Michael Watts, was convicted after trial in October 2019. Four defendants have been sentenced for their roles in the scheme:  Ronald Hardy was sentenced to 10 years in prison, Dennis Verderosa was sentenced to six years, McArthur Jean was sentenced to four years and Emin Cohen was sentenced to two years, according to Donaghue.

— Check out Ex-NFL Player, Merrill FA Gets 40-Year Prison Sentence on ThinkAdvisor.


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