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Stock Defrauder Sentenced for His Role in “Pump and Dump” Scheme

Thursday, July 12, 2018 11:02
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PHILADELPHIA – U.S. Attorney William M. McSwain announced that Colorado resident Frank J. Morelli, III, 62, was sentenced today to 84 months in federal prison, followed by three years of supervised release. Morelli previously pleaded guilty in federal court to conspiracy, wire fraud, and securities fraud charges.
Morelli was a significant player in a scheme involving six others to defraud investors and the Securities and Exchange Commission (SEC).  As part of this scheme, Morelli and his fellow fraudsters took control of the majority of the stock in Supernova Resources, Inc. (ticker symbol SNRR), a publicly traded company that purported to manufacture interactive kiosks for, among other things, operation in national retail stores, when in reality no functioning kiosks had been placed in any well-known retail stores.
In order to be able to manipulate Supernova stock, Morelli and his fellow fraudsters filed false documents, used nominees, and put stock in offshore accounts to hide their stock ownership, all in an effort to deceive the SEC that SNRR stock was eligible to be traded when it was not.  They also caused Supernova to issue false and misleading press releases and timed the issuance of these press releases with trades organized amongst themselves.  This gave potential investors the false impression that the stock was increasing in value based on legitimate market activity when it was not.  The fraudsters also agreed to bribe brokers in order to help carry out their scheme.  The schemers had made several million dollars from the scheme and would have continued with their plans to manipulate the stock had the SEC not halted trading in SNRR.
“Hard working, innocent individuals who try to save money for the future are the ones who lose big when crooks like Morelli manipulate the markets with pump and dump stock schemes,” said U.S. Attorney McSwain.  “Market manipulation also causes our economy to take a hit because the public cannot trust that the markets are free and fair.  Thanks to the excellent work of the FBI, SEC, and prosecutors from this Office, Morelli’s days of profiting off of others’ misfortune, created by his own handiwork, are over.”
“All of the machinations that went into perpetuating this ‘pump and dump’ scheme show a clear disregard for the free market, and a willful disregard for the law,” said Michael T. Harpster, Special Agent in Charge of the FBI’s Philadelphia Division. “Mr. Morelli and his accomplices were scam artists, plain and simple, cashing in at the expense of unwitting investors without a second thought. The FBI is firmly committed to finding fraudsters who are selling a false bill of goods, and holding them accountable.”
Morelli is the fifth of seven fraudsters to be sentenced in connection with this scheme.  James Wheeler, the CEO and President of Supernova who controlled the company on behalf of the schemers, was sentenced to 63 months’ imprisonment.  Daniel Starczewski, Morelli’s longtime partner, was sentenced to 30 months’ imprisonment.  Carl Marciniak and Jeffrey Weinfurter, stock manipulators whom Morelli recruited early in the scheme, received sentences of 24 months’ and 36 months’ incarceration, respectively.  The final two schemers, Louis Buonocore and Danny Colon, are scheduled to be sentenced later in 2018.
The case is being investigated by the Federal Bureau of Investigation, with the assistance of the SEC.  It is being prosecuted by Assistant United States Attorneys Patrick J. Murray and Judy Smith.


Source: http://criminal-justice-online-courses.blogspot.com/2018/07/stock-defrauder-sentenced-for-his-role.html

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