WPCNR FBI WIRE. Special From the Federal Bureau of Investigaton. June 28, 2016:
Earlier today, Darren Goodrich, a registered broker at a brokerage firm in El Segundo, California, pleaded guilty to conspiracy to commit securities fraud for manipulating the stock of Cubed, Inc. (Cubed), which traded (ironically) under the ticker symbol CRPT.
Since fiscal year 2009, the Justice Department has filed over 18,000 financial fraud cases against more than 25,000 defendants. For more information on the task force, please visit www.StopFraud.gov.
The guilty plea was entered before United States Magistrate Judge Vera M. Scanlon at the federal courthouse in Brooklyn, New York. When sentenced, Goodrich faces up to five years in prison, as well as restitution, criminal forfeiture, and a fine.
The guilty plea was announced by Robert L. Capers, United States Attorney for the Eastern District of New York, and Diego Rodriguez, Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office.
According to court filings and facts presented at the plea hearing, between March 2014 and July 2014, Goodrich and his co-conspirators engaged in a scheme to defraud investors and potential investors in Cubed by artificially controlling the price and volume of traded shares in the company through fraudulent concealment of the defendants’ and their co-conspirators’ ownership interests and engineering price movements and trading volume in the stock.
In March 2014, Goodrich’s co-conspirators took Cubed public through an asset purchase agreement. On April 22, 2014, Cubed’s stock began trading in earnest. Between April 22, 2014 and April 30, 2014, Goodrich and his co-conspirators concocted trading volume in this stock by purchasing more than 50% of the total number of Cubed shares purchased during this period.
Between May 2, 2014 and June 29, 2014, law enforcement authorities conducted a judicially-authorized wiretap of one of Goodrich’s co-conspirator’s cellular telephone. The wiretap revealed that Goodrich and his co-conspirators fraudulently manipulated Cubed’s stock by artificially controlling the price and volume of that stock through orchestrated trading.
Rather than generating significant market interest and causing a quick pump and dump that would elicit regulators’ scrutiny, the conspirators gradually increased the price of Cubed’s stock to give it the appearance of a legitimate company with genuine and steady market demand for the security.
For example, on May 5, 2014, while Cubed was in a period of gradual increase from $5.20 on April 22, 2014 to $5.42 on May 22, 2014, a co-conspirator called Goodrich, and stated, “Can you buy a 100 and see if [the other market maker] moves?” Goodrich complied and then responded, “Yeah, they’re going.”
Goodrich and his co-conspirators used an attorney escrow account to successfully control the price and volume of Cubed’s stock.
On June 23, 2014, Cubed reached its highest closing price of $6.75 per share, resulting in a market capitalization of approximately $200 million.
Previously, Cubed filed with the SEC a Form 10-Q and reported less than $1,500 in cash, zero revenue, negative stockholders’ equity, a net loss of $15,000, and accrued professional fees of $131,824.
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The government’s case is being prosecuted by the Office’s Business and Securities Fraud Section. Assistant United States Attorneys Shannon C. Jones, Christopher L. Nasson, and Patrick Hein are in charge of the prosecution, with assistance provided by Assistant United States Attorney Claire S. Kedeshian of the Office’s Civil Division, which is responsible for the forfeiture of assets.
The charges were brought in connection with the President’s Financial Fraud Enforcement Task Force. The task force was established to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. Attorneys’ offices, and state and local partners, it is the broadest coalition of law enforcement, investigatory, and regulatory agencies ever assembled to combat fraud.
Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state, and local authorities; addressing discrimination in the lending and financial markets; and conducting outreach to the public, victims, financial institutions, and other organizations. Since fiscal year 2009, the Justice Department has filed over 18,000 financial fraud cases against more than 25,000 defendants. For more information on the task force, please visit ww.StopFraud.gov.
Residence: Manhattan Beach, California