Los Angeles police have arrested 14 people for allegedly pulling off a stock manipulation scam that conned 20,000 investors out of more than $30m (£19m) by fraudulently pumping up the share prices with slick marketing campaigns, including one fronted by the actress Pamela Anderson.
The suspects are alleged to have bought shares in publicly traded business then pumped up the share price with “slick market campaigns, slick press releases, payments to stock prompters and cross trading”, which involved buying and selling shares amongst themselves, the California attorney’s office said in a statement.
Then, using their marketing to lure in investors, they are alleged to have dumped the stock onto unsuspecting buyers, thus raking in big profits. One of the stocks in question was reported to be of a company called frogads.com, promoted in a commercial by former Baywatch star. Anderson herself, however, is not suspected of any wrongdoing.
“The defendants’ alleged combination of celebrities, press releases, gimmicks and lies was similar to a how a magician deceives unsuspecting believers into an illusion,” Bill Lewis from the FBI’s Los Angeles Field Office, said after the arrests were made on Thursday. “While operating the schemes alleged in the indictments, the defendants kept their audience captive until stock prices peaked, while investor money vanished into defendants’ bank accounts.”
Losses are still being tallied and currently stand at more than $30m. But André Birotte, the US Attorney in charge of the case, told the Los Angeles Times that the final figure could top $300m. The 14 people were arrested after authorities unsealed two grand jury indictments following a three-year investigation into the scam using wiretaps to secretly record phone calls and track messages. In one wiretapped phone call, a suspect was recorded saying: “What I do is turn stock into money.”
Sherman Mazur, 63, and his nephew, 40-year-old Ari Kaplan, are alleged to have masterminded one of the scams, which focused on deals involving two businesses. The first, GenMed, purported to manufacture generic pharmaceuticals, while the other, Biostem, claimed to develop regenerative stem cell treatments.