Leader of International Pump-and-Dump Sentenced to 216 Months
The man who orchestrated a large international microcap market manipulation involving at least 34 persons was sentenced to serve 216 months in prison after pleading guilty. Harold Gallison, pleaded guilty to two counts of conspiracy to commit wire fraud, one count of conspiracy to commit international money laundering and one count of conspiring to launder the proceeds of a number of securities fraud schemes. U.S. v. Gallison, 1:15-cr-00178 (E.D. Va.).
Mr. Gallison admitted in connection with his guilty plea that he participated in an international pump-and-dump scheme. Specifically, Mr. Gallison stated that he and others sought to inflate the share price of OTC stocks Warrior Girl Corp. and Everock Inc. through coordinated trading that created the appearance of increased demand. Once the share price increased they sold or dumped their shares. The scheme was facilitated through an offshore brokerage and money laundering platform that used various names such as Sandias Azucaradas, Moneyline Brokers and others. The scheme generated more than $25 million.
The SEC brought a parallel action, SEC v. Gallison, Civil Action No. 1:15-cv-05456 (S.D.N.Y. Filed July 14, 2015). It named thirty–four defendants, including fifteen individuals and nineteen entities. Key individual defendants include: Mr. Gallision, a founder of defendant Moneyline Brokers, and a securities law recidivist, Carl Kruse Sr., Carl Kruse Jr., Frank Zangara, Charles Moeller and Mark Dresner. Key entity defendants include Moneyline, a purported broker dealer based in Costa Rica and controlled by Mr. Gallison; Bastille Advisers, Inc., Club Consultants, Inc., Jurojin, Inc., Sandias Azucaradas CR S.A., and Vanilla Sky, S.A., all affiliated with Moneyline and referred to as Moneyline entities.
The SEC’s complaint alleged that beginning in 2009, and continuing through most of the next year, Moneyline and the Moneyline entities operated as a broker-dealer under the control of Mr. Gallison. The firm sought U.S. based customers who wanted to manipulate the share price of microcap firms they controlled or owned. Under the Moneyline business model U.S. customers were instructed to transfer microcap shares to U.S. brokerage accounts in the name of Moneyline entities. The shares were unregistered and after transfer comingled with other held assets to conceal the actual ownership from the brokers. The Moneyline entities represented to the U.S. brokers that they were the beneficial owners of the shares. A group of Moneyline affiliated persons assisted customers with market manipulation schemes by directing matched trades. The two manipulations here centered on Warrior Girl and Everock Inc., both shell companies. The manipulations employed matched and wash trades and false statements. The complaint alleges violations of Securities Act Sections 5(a), 5(c) and each subsection of Section 17(a). In addition, it alleges violations of Exchange Act Sections 9(a), 10(b), 15(a), 17(a) and control person liability under Section 20(a). The case is pending. See Lit. Rel. No. 23303 (July 14, 2005).