UPDATE 3-FBI arrests seven in international penny stock fraud

Tue Aug 13, 2013 5:01pm EDT
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By Bernard Vaughan

NEW YORK Aug 13 (Reuters) - Seven people who ran a more than $140 million scheme that preyed on investors in 35 countries by fraudulently inflating the price of penny stocks have been arrested, U.S. prosecutors said on Tuesday.

Two other people, including the alleged mastermind, were charged but remain at large, the prosecutors said.

The scheme led to one of the largest international penny stock investigations ever conducted by the Justice Department and the FBI, the U.S. attorney's office in Brooklyn said.

The defendants "used our securities markets as a platform from which to run elaborate fraudulent schemes to victimize unsuspecting investors across the globe," U.S. Attorney Loretta Lynch said in a statement. "Where others saw citizens of the world, the defendants saw a pool of potential marks."

In addition to the "pump-and-dump" scheme, the defendants operated call centers to induce investors to pay fees for non-existent services to sell their illiquid penny stock shares, in a so-called advance fee scheme, according to the indictment.

The charges against the nine defendants include 24 counts of securities fraud, wire fraud and false personation of Internal Revenue Service employees, according to the statement.

Both schemes were allegedly orchestrated by Sandy Winick, 55, a Canadian who has lived in China, Thailand, Vietnam and the United States, according to an indictment. Winick remains at large and is presumably hiding in Thailand, according to the U.S. attorney's office in Brooklyn.   Continued...