Promoter’s Arrest Sheds Light on Cynk’s $6 Billion Surge
A penny-stock firm’s mysterious surge last year to a $6 billion market cap that stunned Wall Street was allegedly the work of a California stock promoter who conspired with a network of corrupt offshore brokers.
Gregg R. Mulholland, also known as “Stamps” and “Charlie Wolf” according to the government, was arrested Tuesday while traveling to Mexico. U.S. prosecutors charged him with masterminding a $300 million scheme to manipulate the value of stocks — including Cynk Technology Corp.
The arrest sheds light on the machinations behind the surprise appearance of Cynk on the financial scene in 2014. The company had begun trading the year before for just a few cents per share, but soon drew the attention of Wall Street professionals and bloggers as its fortunes appeared to brighten.
Mulholland, a citizen of the U.S. and Canada, secretly owned Legacy Global Markets SA, a brokerage based in Panama and Belize, according to prosecutors in Brooklyn, New York. That firm was implicated in an alleged $500 million conspiracy among a group of executives to cheat penny stock investors, launder proceeds and hide assets from tax authorities, according to a complaint unsealed Tuesday.
Potential Concealment
The case stems from efforts by the Justice Department to investigate potential concealment of assets in popular tax havens, such as Belize.
“We are committed to closing fraudulent offshore safe havens and prosecuting those who seek to abuse the financial markets to enrich themselves,” Acting Brooklyn U.S. Attorney Kelly Currie said in a statement Tuesday.
In one of the stock manipulations allegedly part of the plot, Mulholland engaged in “a classic pump and dump” of Cynk. Purportedly founded as an online social network, Belize-based Cynk had no revenue or assets when its value suddenly spiked in 2014.
Mulholland allegedly told another conspirator in a phone conversation recorded by U.S. investigators in May 2014 that he had “all the free trading shares” of Cynk. Not long afterward, the share price rose dramatically amid a series of transactions in May and June, prosecutors said.
‘Unexplainable Increases’
“Based on my training and experience, these incredible and unexplainable increases” are the result of “fraudulent market manipulation,” a U.S. investigator said in the complaint.
The U.S. Securities and Exchange Commission also sued Mulholland Tuesday, alleging he surreptitiously accumulated at least 84 percent of another company, Vision Plasma Systems Inc., and then dumped his shares, making at least $21 million.
A lawyer for Mulholland, Irving Einhorn, declined to comment on the allegations.
Mulholland’s arrest in Phoenix followed charges last year against Robert Bandfield, a U.S. citizen accused of stock fraud in a scheme that allegedly involved five executives and offshore brokerage entities including Legacy.
Bandfield has pleaded not guilty.
The defendants “set up sham companies with figureheads at the helm in an attempt to deceive U.S. law enforcement and regulators,” Loretta Lynch, then the U.S. attorney in Brooklyn, said when the charges were unsealed in 2014. She became U.S. attorney general this year.
Bragged
They “ bragged about their scheme to their clients,” Lynch said.
Mulholland faced a previous enforcement effort by the SEC. In 2011, the regulator accused him of involvement in a pump-and-dump manipulation of a sports drink company founded by Daniel “Rudy” Ruettiger, the inspiration behind the film “Rudy.”
Mulholland was ordered to pay more than $5.3 million, according to the SEC.
Mulholland never paid the fine, according to the agency.
The case is U.S. v. Mulholland, 15-mj-00563, U.S. District Court, Eastern District of New York (Brooklyn).
