Man Guilty of Conspiracy to Commit Wire Fraud and Securities Fraud – CBS Tampa

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ATLANTA, Ga. (CW44 News At 10)– Mark Melnick admitted to a criminal briefing accusing him of conspiracy to commit wire and securities fraud stemming from a years-long plot to massively manipulate the prices of short-term call options, public companies. Melnick is the second defendant to plead guilty for participating in this plot. In December 2020, Bart Ross was also found guilty of conspiracy to commit wire and securities fraud.

“Melnick and the others involved in this plan made profits simply by cheating, not because of their financial acumen,” said U.S. Attorney Kurt R Erskine. “We will prosecute all forms of securities fraud, whether it involves defrauding investors, insider trading, pumping and dumping schemes, or the sophisticated types of market manipulation at stake here.”

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“Criminal manipulation of securities may seem like a harmless crime, but there are real victims, and their lives have changed because of it,” said Chris Hacker, FBI Special Agent for Atlanta. “The FBI is committed to working with our law enforcement partners to prevent greedy traders like Melnick from making illegal profits.”

According to US Attorney Erskine, the charges and other information presented in court: Between approximately October 2017 and January 2020, Melnick, Ross and at least three others conspired to execute a scheme in which they previously bought and sold short-term securities. call options—in large, publicly traded companies (usually Fortune 500 companies) are based on materially false rumors about the companies they create and spread. These materially false rumors were intended to increase the price of securities (both the underlying stock and options).

A call option is essentially a contract that gives the option holder the right, but no obligation, to buy shares of the underlying stock at a specified price per share (the option’s strike price) at a specified future date (the option expiration date). Date). Generally, a call option holder benefits when the price of the underlying stock rises. Short-term call options are those that usually expire within a week.

Ross, formerly a FINRA-registered broker, and co-conspirators spawned the rumours. Conspirators would often correct a proposed rumor by exchanging drafts among themselves using the Trillian instant messaging app. Melnick was a day trader and Senior Trading Strategist for T3 Live. Melnick often made a “technical assessment” of whether a particular false rumor would succeed. Once a rumor was formulated and finalized, one of the collaborators identified as Individual-1 in the crime information was responsible for spreading the rumor through Trillian to multiple accounts, which would have caused the false rumor to spread through one account. Various Twitter accounts as well as more market subscription services, including Trade The News, TradeXchange, and Benzinga.

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Before Individual-1 spread the rumor, Melnick, Ross and other co-conspirators would secure a position at the publicly traded company that was the subject of the materially false rumor. Co-conspirators often bought short-term call options (sometimes just minutes or seconds before) before Individual-1 spread the rumor. Conspirators often (but not always) buy short-term call options because the price of these options is more sensitive than the price of the underlying stock. Therefore, it was possible for Melnick and others to generate a larger percentage return by trading short-term call options rather than the underlying stock. Melnick and the conspirators profited from their scheme by selling options (or other securities) after their prices rose. Typically, they would sell their positions shortly after the rumor spread (and after the price of the option or underlying stock rose). Melnick also made a deal with Individual-1 to share some of the profits from the program with Individual-1.

Melnick made at least 102 transactions based on the generation and spread of false rumors, including in March and April 2018, when Ross traded short-term call options on Disney and Ben Franklin Resources, respectively. Overall, Melnick made about $374,000 in profit from the program.

Mark Melnick, 41, of Marlboro, New Jersey, is scheduled to be sentenced before U.S. District Judge Leigh Martin May at 9:30 a.m. on December 16, 2021.

This case is being investigated by the Federal Bureau of Investigation with assistance from the Securities and Exchange Commission.

US Assistants of Attorneys Alex R. Sistla and Thomas J. Krepp are prosecuting the case.

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The SEC is investigating possible civil violations of US securities laws regarding the plan described above. In connection with its investigation, the SEC filed a separate civil enforcement action and consent order against Melnick in the U.S. District Court for the Northern District of Georgia.


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