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SEC Charges Seven in Global Warming Pump-and-Dump Scheme

SEC Charges Seven in Global Warming Pump-and-Dump Scheme


Washington, D.C., Feb. 18, 2011 — The Securities and Exchange Commission today charged a group of seven individuals who perpetrated a fraudulent pump-and-dump scheme in the stock of a sham company that purported to provide products and services to fight global warming.

The SEC alleges that the group included stock promoters, traders, and a lawyer who wrote a fraudulent opinion letter. The scheme resulted in more than $7 million in illicit profits from sales of stock in CO2 Tech Ltd. at artificially inflated prices. Despite touting impressive business relationships and anti-global warming technology innovations, CO2 Tech did not have any significant assets or operations. The company was purportedly based in London, and its stock prices were quoted in the Pink Sheets.

According to the SEC’s complaint filed in U.S. District Court for the Southern District of Florida, the scheme was perpetrated through Red Sea Management Ltd., a Costa Rican asset protection company that laundered millions of dollars in illicit trading proceeds out of the United States on behalf of its clients. The U.S. Department of Justice today announced related criminal charges against six of the individuals.

“This group of illicit stock promoters sought to hide their scheme behind offshore entities, but their misconduct was exposed by the excellent cooperation of law enforcement agencies here and abroad,” said Cheryl Scarboro, Associate Director in the SEC’s Division of Enforcement.

According to the SEC’s complaint, the fraudulent pump-and-dump scheme in CO2 Tech stock occurred from late 2006 to April 2007 through the efforts of the following individuals:

  • Jonathan R. Curshen, a Sarasota, Fla., resident who founded and led Red Sea.
  • David C. Ricci and Ronny Morales Salazar of San Jose, Costa Rica, who were Red Sea stock traders.
  • Ariav “Eric” Weinbaum and Yitzchak Zigdon of Israel, who were Red Sea clients.
  • Robert L. Weidenbaum of Coral Gables, Fla., a stock promoter who operates a company called CLX & Associates.
  • Michael S. Krome of Lake Grove, N.Y., a lawyer who allegedly wrote a fraudulent opinion letter.

The SEC’s complaint alleges that CO2 Tech falsely touted business relationships that the company had not formed, including a relationship with the Boeing Company. In fact, there were no communications, correspondence or understandings between CO2 Tech and Boeing.

The SEC alleges that Weinbaum and Zigdon initiated the pump-and-dump of CO2 Tech by utilizing the services of Krome, who issued a fraudulent opinion letter to enable them to have the restrictive legend removed from their CO2 Tech stock certificate. This provided them nearly full control over the freely tradeable shares of CO2 Tech stock. Weinbaum then hired Red Sea to sell massive quantities of CO2 Tech stock to the investing public through its web of nominee brokerage accounts. Zigdon caused the materially false and misleading information about CO2 Tech to be disseminated in press releases and on CO2 Tech’s website.

According to the SEC’s complaint, Weinbaum hired Weidenbaum to redistribute the false information through websites, spam e-mails and fax blasts. Weidenbaum enlisted a group of stock promoters who then executed illegal “matched orders” with Red Sea’s nominee brokerage accounts in order to “jump-start” the market and increase the price of the stock. As a result of the false media campaign and the illegal matched orders, the market price of CO2 Tech stock increased 81 percent increase in one day and trading volume increased 1,573 percent.

The SEC alleges that after Weinbaum hired Red Sea, he directed Red Sea stock traders Ricci and Salazar to sell the stock. Ricci and Salazar placed multiple layered orders to sell CO2 Tech stock – thereby creating the false appearance that the market for the stock was deeper than it actually was. This coordinated misconduct enabled stock sales at artificially inflated prices for profits of more than $7 million at the expense of unsuspecting investors.

The SEC’s complaint alleges that Curshen, Ricci, Salazar, Weinbaum, Zigdon, and Krome violated Section 5(a), (c) and 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. Weidenbaum is charged with aiding and abetting Weinbaum and Zigdon’s violations of Exchange Act 10(b) and Rule 10b-5. Without admitting or denying the allegations in the complaint, Ricci settled the SEC’s charges by agreeing to an injunction against future violations of these provisions and a penny stock bar.

In the related criminal action, charges brought by the Justice Department’s Criminal Division were unsealed against Curshen, Krome, Salazar, Weidenbaum, Weinbaum, and Zigdon. The defendants are charged in the Southern District of Florida variously with conspiracy to commit securities, mail and wire fraud; wire fraud; mail fraud; violating the securities regulation laws and obstruction of justice.

The SEC’s investigation was conducted by Deborah Tarasevich, Keith O’Donnell and John Lehmann, Jr. Richard Simpson will litigate the case. The SEC acknowledges the assistance of the Fraud Section of the Criminal Division of the U.S. Department of Justice, the Federal Bureau of Investigation, and the U.S. Postal Inspection Service. The SEC also acknowledges the assistance of the Financial Industry Regulatory Authority (FINRA) and several foreign law enforcement agencies that provided substantial support to the investigation, including the Costa Rican Police, British Columbia Securities Commission, Israel Securities Authority, United Kingdom Financial Services Authority, and The City of London Police.

# # #

For more information about this enforcement action, contact:

Cheryl J. Scarboro
Associate Director, SEC Division of Enforcement
(202) 551-4403

Deborah Tarasevich
Assistant Director, SEC Division of Enforcement
(202) 551-4726



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