NASD Regulation Charges Global Equities Group, Inc. and Five Employees with Fraud and Stock Manipulation
Nancy A. Condon
(202) 728-8379 (202) 974-2850
Washington, D.C.—NASD Regulation, Inc., today announced that it has filed a complaint against Global Equities Group, Inc. and five of its brokers, charging stock fraud and manipulation and for using abusive, high-pressure sales tactics to sell investors low-priced, speculative securities that were part of an initial public offering (IPO). After the investigation began, Global, located in New York, NY, closed in January 1998.
Named in the complaint, and charged with a variety of sales practice and supervisory violations, are the firm’s majority owner, Aleksandr Shvarts; President, Michael Christ; Vice-President, Thomas McDermott; and two registered persons, Damiano Coraci; and Eric “Igor” Kuvykin.
Shvarts, Coraci, and Kuvykin are charged with fraud in connection with the July 1996 underwriting of CluckCorp International, Inc. NASD Regulation’s investigation uncovered the use of illegal boiler room sales tactics, including high pressure sales tactics. NASD Regulation charged that Global’s brokers, several of whom were not registered with the NASD, sold securities offered in the IPO, made material misrepresentations including making baseless price predictions; omitted material information; and guaranteed future stock performance.
In addition, NASD Regulation charged that before the effective date of the CluckCorp IPO, Shvarts, Coraci, and Kuvykin offered, to prospective employees, undisclosed compensation in the form of CluckCorp warrants that were offered in the IPO. The complaint alleges that the compensation was offered as an incentive to join Global and solicit indications of interest in the IPO. The complaint alleges that Shvarts, Coraci, and Kuvykin told the prospective employees to place the warrants in accounts that the employees controlled or that could be a source of client referrals.
NASD Regulation’s investigation also uncovered instances in which Shvarts, Coraci, and Kuvykin funneled portions of the IPO allocation to accounts restricted under NASD’s free-riding and withholding rule. Shvarts generated windfall profits for himself by directing shares to restricted accounts and for others, through accounts he controlled.
Finally, the complaint charges Christ and McDermott inadequately supervised the firm and its employees. In addition, Coraci and Kuvykin acted as principals while not registered in that capacity and that Coraci allowed unregistered individuals to act as brokers.
Separately, Shvarts and Kuvykin have both plead guilty to conspiracy to commit securities fraud, wire fraud, and mail fraud in a case brought by the United States Attorney’s Office for the Eastern District of New York involving the CluckCorp IPO, among other matters. The prosecutors handling that case requested and were provided with information obtained in the pre-existing NASD Regulation investigation. The federal prosecution includes allegations of money-laundering which are outside the jurisdiction of NASD Regulation.
The complaint does not allege any wrongdoing on the part of CluckCorp International, Inc.
The investigation leading up to the filing of this complaint was conducted by NASD Regulation’s District Office, in New York City.
The issuance of a disciplinary complaint represents the initiation of a formal proceeding by the NASD in which findings as to the allegations in the complaint have not been made and does not represent a decision as to any of the allegations contained in the complaint. Because this complaint is unadjudicated, the respondents should be contacted before drawing any conclusion regarding the allegations in the complaint.
Under NASD rules, the individuals and the firms named in the complaint can file a response and request a hearing before an NASD Regulation disciplinary panel. Possible sanctions include a fine, censure, suspension, bar, or expulsion from the NASD.
Investors can obtain more information about NASD Regulation as well as the disciplinary record of any NASD-registered broker or brokerage firm by calling (800) 289-9999, or by sending an e-mail through NASD Regulation’s Web site.
NASD Regulation oversees all U.S. stockbrokers and brokerage firms. NASD Regulation, and The Nasdaq Stock Market, Inc., are subsidiaries of the National Association of Securities Dealers, Inc. (NASD®), the largest securities-industry self-regulatory organization in the United States.