Named in other “pump and dump” fraud schemes
Canadian-born Cayman resident Myron Gushlak was sentenced to six years in prison for share price manipulation by a US District Court in New York on Thursday.
According to US Attorney Loretta Lynch, Mr. Gushlak had manipulated the stock price of Global Net Inc between May 2000 and April 2001 while he was a board member at the company.
“Gushlak paid secret kickbacks to brokers, in the form of cash and free stock in exchange for the brokers causing their clients to purchase blocks of GlobalNet common stock from Gushlak and others at artificially inflated prices,” prosecutors claimed in court documents.
Details of the accusations did not emerge earlier because Mr. Gushlak was cooperating with prosecutors and the case had been under seal. According to judge Nicholas G. Garaufis, however, Mr. Gushlak’s cooperation was “inconsistent” and had been used “as a license to continue to deceive those with whom he conducted business”.
Mr. Gushlak has more recently been named in connection with investigations into “pump and dump” schemes in Germany and the US.
German and US investors in three companies, promoted by Gushlak and a German television stock market show host, have allegedly lost millions in the fraud.
Markus Frick, a German version of CNBC’s Jim Cramer, was indicted in 2007 by state prosecutors in Berlin, Germany, for promoting three stocks without disclosing personal positions and interests. The trial is still ongoing.
Mr. Frick, a baker and stock market book author, has since admitted to German magazine Der Spiegel that he has provided marketing opportunities to interested parties during his well-attended public seminars. According to his defence attorney Daniel Krause, Mr. Frick also unwittingly promoted several stocks that turned out to be worthless “pump and dump” schemes. However, Mr. Krause insisted that the indictment does not accuse his defendant of having benefited from the scams, perpetrated “by two Panamanian firms through Swiss bank accounts”. Three of the shares that Mr. Frick endorsed in 2006 and 2007, Star Energy Corp., StarGold Mines Inc. and Russoil Corp., were all practically worthless publicly-listed shell companies promoted by representatives from Panama-registered and Cayman-operated firm Bluewater Partners, according to Der Spiegel.
Mr. Frick told the magazine that in 2006 he met with Igor Lipovetsky and Gushlak, two Bluewater representatives and stock promoters. In newsletters to investors he subsequently claimed to have excellent relations to the management of the firms. In a marketing opportunity management representatives of the firms were also allowed to attended his seminars to get into direct contact with investors in Germany and Austria. Star Energy, StarGold and Russoil initially were public shell companies under different names that had no significant operations. After having been taken over by new owners all three companies executed a name change and a form of share split to increase the number of shares that could be issued. Each of the new tens of millions of penny stocks only had a book value of a fraction of a cent. German investors, however, were invited by Mr. Frick to buy the shares at prices ranging from $1 to $3 per share, resulting in huge profits for the sellers who received the shares at book value.
Investigations by German supervisory agency for the financial markets BaFin have established a trading volume of EUR760 million in the three stocks. In 2007, the prices of all three stocks collapsed within days from between EUR 1,30 and EUR 5 to only a few cents.
The scams were helped by the fact that all three stocks were listed on NASDAQ’s OTC BB and the Deutsche Boerse “grey market”, both lightly regulated over-the-counter markets.
In all three cases the companies purported to be in process of merging or having merged with Russian companies that provided the companies with access to Russian commodities.
According to filings with the SEC, Gushlak “acted as an advisor to Russoil” and as “a liaison” between Silvestre Hutchinson, the CEO and at the time majority shareholders of Russoil, and representatives of Smolenergy, a company Russoil was purported to acquire. “Mr. Gushlak should be deemed an affiliate of Bluewater and Bluewater is a shareholder of Russoil,” the filing said.
Bluewater also had several other links to the three companies. Elena Furman, Bluewater Partners’ communications director, executed the public relations and communications work for Russoil, Star Energy and Stargold Mines through her New York company REVsolutions LLC.
Bryson Farrill, an
advisor to Bluewater Partners according to the firm’s website, was the CEO of
Stargold Mines, an alleged mining firm, for nearly a year in 2007 and 2008. Mr.
Farrill previously had also joined the board of Star Energy as a director. Star
Energy issued 2 million shares to the Panamanian firm IAB Island Ventures for
certain services rendered in connection with a share buy agreement. IAB Island
Ventures in turn is run by Margot Hutchinson, the wife of one-time Russoil CEO
Silvestre Hutchinson.
Mr. Hutchinson was also familiar with Marcus Segal, in
2007 CEO of Star Energy. Both men had been on the board of Quest Minerals and
Mining, another company that counted Bluewater Partners among its shareholders
and saw its share price collapse under mysterious
circumstances.
Gushlak and his
wife Debbie Gushlak have ownership in a company that owns Casa Coyaba, a villa
previously listed for $19 million. The auction of the property was recently
halted. The couple are currently involved in divorce proceeding in the Cayman
Islands.
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