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Passaic, NJ - US Charges Two New Jersey Traders Over $26 Million Scheme

Published on: December 12, 2016 01:23 PM
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FILE - U.S. Attorney for New Jersey Paul J. Fishman attends a press conference in Newark, New Jersey July 14, 2016. REUTERS/Eduardo Munoz FILE - U.S. Attorney for New Jersey Paul J. Fishman attends a press conference in Newark, New Jersey July 14, 2016. REUTERS/Eduardo Munoz

Passaic, NJ - Two New Jersey-based securities traders were arrested today and charged with orchestrating a massive, long-running market manipulation scheme that netted them more than $26 million in illegal profits between 2014 and 2015, U.S. Attorney Paul J. Fishman announced.

Joseph Taub, 37, of Clifton, New Jersey, and Elazar Shmalo, 21, of Passaic, New Jersey, were each charged by complaint with one count of conspiracy to commit securities fraud.

Attorneys listed for the men did not immediately return calls seeking comment on their behalf. Both men made initial court appearances and were released on bail. They were barred from trading in securities on others’ accounts as a condition of their release.

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“As outlined in today’s complaint, Taub, Shmalo and others engaged in a scheme to place numerous buy and sell orders for specifically targeted, lightly traded securities in a coordinated fashion that allowed them to manipulate the price to their advantage,” U.S. Attorney Fishman said. “Over a period of years, they manipulated $10 billion worth of securities in this way, pocketing $26 million in illicit profits at the expense of other investors. The charges we filed today are part of our continuing effort to hold accountable those who would try to illegally tilt the playing field in their own favor.”

“The FBI is diligent in ensuring that anyone intent on corrupting the free market will be brought to justice,” Special Agent in Charge Timothy Gallagher of the FBI’s Newark Division said. “This type of behavior cheats the average investor and has a terrible impact on the securities industry.”

According to documents filed in this case and statements made in court:

From December 2013 to December 2016, Taub, Shmalo, and other conspirators allegedly orchestrated a sophisticated scheme to manipulate the prices of securities of numerous public companies by coordinating trading in dozens of brokerage accounts that the conspirators controlled. The defendants and their conspirators looked for companies whose securities had low trading volumes because it was easier to manipulate their prices. In this way, they injected false information into the market about the supply and demand of these securities, artificially inflating their prices.

They then profited by selling at the artificially inflated prices the shares they had accumulated at lower prices.
In 2014 and 2015 alone, Taub, Shmalo and their conspirators engaged in more than 23,000 instances of manipulative trading, buying and selling $10 billion worth of securities and making more than $26 million in illegal profits.

The defendants and their conspirators relied on pre-arranged and coordinated trading among dozens of brokerage accounts they controlled. These accounts were held in the conspirators’ own names, the names of their family members, and the names of entities the conspirators controlled.

Many of the accounts were opened in the names of individuals who neither controlled the accounts nor traded the securities held in the accounts (straw account holders). Taub funded many of the accounts that were not in his name and used the straw account holders to conceal the scheme from regulators and law enforcement.

The manipulative trading generally involved two or more trading accounts that bought and sold the same lightly traded stock on the same day during the same period of time. At least one account was primarily used to place multiple smaller orders to create upward or downward price pressure (the “helper account”) and at least one other account was primarily used to buy and sell larger quantities of stock (the “winner account”). The winner accounts profited by buying and selling at prices affected by the manipulative orders in the helper accounts. The helper and winner accounts were almost always held at different brokerage firms. The helper accounts frequently broke even or lost money, but in conjunction with the winner accounts, the conspirators profited overall.

The trading manipulations usually lasted just a few minutes each, during which time the conspirators sometimes controlled at least 80 percent of the volume of a targeted stock and traded in several accounts simultaneously. Most of the coordinated trading events involved dozens of orders and the purchase and sale of thousands of shares of targeted stocks. The defendants and their conspirators generated a net profit from these events more than 80 percent of the time.

The count of conspiracy to commit securities fraud with which the defendants are charged carries a maximum potential penalty of five years in prison and a fine the greater of $250,000 or twice the gain derived from the offense or twice the loss caused by the offense.

The U.S. Attorney’s Office is also planning to file a separate civil action seeking forfeiture of brokerage accounts in which the manipulative trades were executed, bank and brokerage accounts funded with proceeds of the scheme, and Taub’s interest in companies in which he invested the proceeds of the scheme. Civil forfeiture cases are “in rem” proceedings – proceedings against things. The forfeiture claims in this case are based on allegations that the forfeitable property is proceeds of the securities fraud scheme or is property involved in laundering the proceeds of the scheme.

In a separate civil action, the Securities and Exchange commission today filed a complaint in Newark federal court charging Taub and Shmalo with violating and aiding and abetting violations of the antifraud provisions of the securities laws. The complaint seeks a permanent injunction as well as the return of ill-gotten gains plus interest and penalties.


The charge and allegations contained in the complaint are merely accusations, and the defendants are presumed innocent unless and until proven guilty.



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Read Comments (36)  —  Post Yours »

1

 Dec 12, 2016 at 01:51 PM Anonymous Says:

Another frum chilul Hashem?

2

 Dec 12, 2016 at 02:01 PM lipa21 Says:

anyone know these 2 people?

5

 Dec 12, 2016 at 03:31 PM Mark Levin Says:

What happened to innocent until PROVEN guilty?

6

 Dec 12, 2016 at 03:51 PM The_Truth Says:

Reply to #5  
Mark Levin Says:

What happened to innocent until PROVEN guilty?

This is just what they have been accused of and charged with. They are still (legally) innocent until it is proven.

7

 Dec 12, 2016 at 04:43 PM JoshB Says:

How do I donate to the pidyan shvuyim campaign? nobody gets charged with this type of crime, they were targeted since they're frum yidden. Just like the others, everybody spies for friends, and 1924 bank laws should not be considered bank fraud.

8

 Dec 12, 2016 at 04:54 PM Neverjudge Says:

Reply to #2  
lipa21 Says:

anyone know these 2 people?

Actually I do, on a very personal level. Don't believe everything you read. They are innocent good Jews. Not just good, great, respectable and extremely giving human beings. The amount they have done for klal yisroel on a private level is unbelievable. They are yashar and the only chillul hashem is from this website that is choosing to post about Jews that have not been proving guilty for the sake of keeping their pockets and readers satisfied. The only ones guilty right now is vos Iz neias

9

 Dec 12, 2016 at 04:59 PM Anonymous Says:

Reply to #1  
Anonymous Says:

Another frum chilul Hashem?

I assume you would want Hashem to judge you favorably when your day of reckoning arrives, so you should do the same for others. Dont be quick to judge others otherwise you will await the same. Midah Keneged Midah

10

 Dec 12, 2016 at 05:19 PM Lawyer Says:

Reply to #8  
Neverjudge Says:

Actually I do, on a very personal level. Don't believe everything you read. They are innocent good Jews. Not just good, great, respectable and extremely giving human beings. The amount they have done for klal yisroel on a private level is unbelievable. They are yashar and the only chillul hashem is from this website that is choosing to post about Jews that have not been proving guilty for the sake of keeping their pockets and readers satisfied. The only ones guilty right now is vos Iz neias

They are innocent until proven guilty.
But being a good giving Jew blah blah blah doesn't make them innocent.
If you know them why don't you give us the whole story. Don't just say they are good people.

11

 Dec 12, 2016 at 05:28 PM JoshB Says:

Reply to #8  
Neverjudge Says:

Actually I do, on a very personal level. Don't believe everything you read. They are innocent good Jews. Not just good, great, respectable and extremely giving human beings. The amount they have done for klal yisroel on a private level is unbelievable. They are yashar and the only chillul hashem is from this website that is choosing to post about Jews that have not been proving guilty for the sake of keeping their pockets and readers satisfied. The only ones guilty right now is vos Iz neias

דינא דמלכותא דינא איז נאָר פֿאַר די מאדערנע מענטשן

12

 Dec 12, 2016 at 05:33 PM Moishe_Mechel Says:

which yeshiva honored them? did they make a parlor meeting?

13

 Dec 12, 2016 at 05:35 PM Normal Says:

If I steal $10 million dollars and give it all to Tzedokah, does that make me a bad person or a good person? Neither, it makes me a thief.

If guilty, I bet he won't get 27 years.

14

 Dec 12, 2016 at 05:41 PM Neverjudge Says:

Reply to #10  
Lawyer Says:

They are innocent until proven guilty.
But being a good giving Jew blah blah blah doesn't make them innocent.
If you know them why don't you give us the whole story. Don't just say they are good people.

I don't really think I need to respond to that considering that it's none of yours or anyone's business. And like the article says innocent until proven guilty. That's about all you need to know.

15

 Dec 12, 2016 at 05:45 PM Neverjudge Says:

Reply to #10  
Lawyer Says:

They are innocent until proven guilty.
But being a good giving Jew blah blah blah doesn't make them innocent.
If you know them why don't you give us the whole story. Don't just say they are good people.

There was never a reason for vos Iz neias to post this in the first place other than to shame people and keep readers interested. Remember that the people in this article are not names they are people with families, friends and communities. Don't be so quick to judge.

16

 Dec 12, 2016 at 05:59 PM Neverjudge Says:

Reply to #13  
Normal Says:

If I steal $10 million dollars and give it all to Tzedokah, does that make me a bad person or a good person? Neither, it makes me a thief.

If guilty, I bet he won't get 27 years.

That is most definitely true, they are not thieves and don't dare call them that.

17

 Dec 12, 2016 at 06:14 PM Neverjudge Says:

Reply to #13  
Normal Says:

If I steal $10 million dollars and give it all to Tzedokah, does that make me a bad person or a good person? Neither, it makes me a thief.

If guilty, I bet he won't get 27 years.

And it's really NORMAL to put someone in jail without even knowing one detail or the person involved. Al tiftach peh lasatan they're not murderers, they're innocent people.

18

 Dec 12, 2016 at 06:15 PM FarRockDude Says:

I don't understand what was illegal in what they did. Did they try to hide their names? No. Did they use a Ponzi scheme? No. They traded large blocks of stock over a public exchange which made the stock go up, and they they sold the stock. If a stock is available to be manipulated in the way the article says, that's on the trading firms that trade that stock; not the investor.Isn't that what hedge funds do every day? I'm no lawyer but it seems to me that what they did was not only legal, it was brilliant!

19

 Dec 12, 2016 at 06:35 PM yaakov doe Says:

The US Attorney's Office doesn't charge unless there are reasonably sure there is a livelihood of conviction. Chris Christie wasn't charged in "bridgegate" although there was some evidence of his involvement, because the Feds didn't have a strong enough case to convict him.
Why do our people have to get involved in such questionable, at best, schemes?

20

 Dec 12, 2016 at 08:03 PM Anonymous Says:

Would the Yidden posting "innocent until proven guilty!" and "they give a lot of tzedokah!" say the same thing about a black or Muslim person accused of a crime? The hypocrisy of some of my fellow Jews makes me sick.

21

 Dec 12, 2016 at 08:44 PM Neverjudge Says:

Reply to #20  
Anonymous Says:

Would the Yidden posting "innocent until proven guilty!" and "they give a lot of tzedokah!" say the same thing about a black or Muslim person accused of a crime? The hypocrisy of some of my fellow Jews makes me sick.

Unbelievable!!!! How can you even compare!!!

22

 Dec 12, 2016 at 08:46 PM Neverjudge Says:

Reply to #20  
Anonymous Says:

Would the Yidden posting "innocent until proven guilty!" and "they give a lot of tzedokah!" say the same thing about a black or Muslim person accused of a crime? The hypocrisy of some of my fellow Jews makes me sick.

Hypocrisy is when a Jew hates on another Jew for new reason!!!!! You know nothing and chances are you don't understand a word about this case. So in that case keep your comments to yourself

23

 Dec 12, 2016 at 08:51 PM Neverjudge Says:

Reply to #20  
Anonymous Says:

Would the Yidden posting "innocent until proven guilty!" and "they give a lot of tzedokah!" say the same thing about a black or Muslim person accused of a crime? The hypocrisy of some of my fellow Jews makes me sick.

And yes we stand up for OUR people especially when we know them for many years. Hypocrisy is comparing a Jew to a black or Muslim. Go ahead compare them to terrorists.. brilliant

24

 Dec 12, 2016 at 08:59 PM Noochie Says:

Reply to #18  
FarRockDude Says:

I don't understand what was illegal in what they did. Did they try to hide their names? No. Did they use a Ponzi scheme? No. They traded large blocks of stock over a public exchange which made the stock go up, and they they sold the stock. If a stock is available to be manipulated in the way the article says, that's on the trading firms that trade that stock; not the investor.Isn't that what hedge funds do every day? I'm no lawyer but it seems to me that what they did was not only legal, it was brilliant!

The fraud was that they used accounts in associates' and family members' names to make it look like many investors were buying the stock, when in fact only they were. Then, once outside investors jumped on what looked like a hot stock, they dumped their shares. This is simply a clever variation on the classic pump-and-dump, which is illegal.

25

 Dec 12, 2016 at 09:00 PM ChareidiMan Says:

Reply to #15  
Neverjudge Says:

There was never a reason for vos Iz neias to post this in the first place other than to shame people and keep readers interested. Remember that the people in this article are not names they are people with families, friends and communities. Don't be so quick to judge.

Stop the nonsense! VIN HAS every right to post these stories since this a Jewish News website and this story is Jewish news. Guess what, the FBI didn't pick me and didn't pick my mother and for good reason, the fact that someone gives tzedukah doe snot even count in this part of the story!

26

 Dec 12, 2016 at 09:19 PM exyid Says:

Reply to #20  
Anonymous Says:

Would the Yidden posting "innocent until proven guilty!" and "they give a lot of tzedokah!" say the same thing about a black or Muslim person accused of a crime? The hypocrisy of some of my fellow Jews makes me sick.

You're absolutely right. I actually know the people involved and the operation. It is exactly as the report says.
It's absolutely true. What they did is not evil though, it mostly preyed on other day-traders rather than 'investors.'

27

 Dec 12, 2016 at 09:39 PM Neverjudge Says:

Reply to #25  
ChareidiMan Says:

Stop the nonsense! VIN HAS every right to post these stories since this a Jewish News website and this story is Jewish news. Guess what, the FBI didn't pick me and didn't pick my mother and for good reason, the fact that someone gives tzedukah doe snot even count in this part of the story!

Your right, absolutely right. It is a free country VIN has every right to post what they choose to. Most people cannot and will not understand this case unless they are involved in wall Street. So to all those who will view them as criminals it is wrong to post this and cause unnecessary embarrassment. All you Jews hating and not understanding the details and enjoying another Jews pain have a special place in the next world.

28

 Dec 12, 2016 at 09:51 PM Anonymous Says:

Reply to #26  
exyid Says:

You're absolutely right. I actually know the people involved and the operation. It is exactly as the report says.
It's absolutely true. What they did is not evil though, it mostly preyed on other day-traders rather than 'investors.'

Preyed is the problem. They should have prayed rather than preyed and then they wouldn't have the embarrassment and huge lawyers fees they now face.

29

 Dec 12, 2016 at 09:40 PM Anonymous Says:

Reply to #26  
exyid Says:

You're absolutely right. I actually know the people involved and the operation. It is exactly as the report says.
It's absolutely true. What they did is not evil though, it mostly preyed on other day-traders rather than 'investors.'

You're not allowed to defraud anyone, even if they're bad people themselves! Evil or not they broke the law and will have to pay back the money they made.

30

 Dec 13, 2016 at 08:54 AM yonasonw Says:

Reply to #5  
Mark Levin Says:

What happened to innocent until PROVEN guilty?

This is a news story and a blog...neither a court or a conviction

31

 Dec 13, 2016 at 08:56 AM Yid and Active Prosecutor Says:

Reply to #7  
JoshB Says:

How do I donate to the pidyan shvuyim campaign? nobody gets charged with this type of crime, they were targeted since they're frum yidden. Just like the others, everybody spies for friends, and 1924 bank laws should not be considered bank fraud.

nobody gets charged with this type of crime, they were targeted since they're frum Yidden"

You are pathetically incorrect

32

 Dec 13, 2016 at 08:59 AM Yid and Active Prosecutor Says:

Reply to #23  
Neverjudge Says:

And yes we stand up for OUR people especially when we know them for many years. Hypocrisy is comparing a Jew to a black or Muslim. Go ahead compare them to terrorists.. brilliant

Your comment is embarrassingly biased and, frankly, exhibits complete ignorance of the criminal justice system. Perchance, you are projecting, as would treat "mere" gentiles less fairly than Yidden?

33

 Dec 13, 2016 at 09:38 AM Neverjudge Says:

Reply to #32  
Yid and Active Prosecutor Says:

Your comment is embarrassingly biased and, frankly, exhibits complete ignorance of the criminal justice system. Perchance, you are projecting, as would treat "mere" gentiles less fairly than Yidden?

You may be a high profile prosecutor, but everyone knows the legal system treats jews much more harshly don't kid yourself.

34

 Dec 13, 2016 at 09:40 AM Neverjudge Says:

Reply to #28  
Anonymous Says:

Preyed is the problem. They should have prayed rather than preyed and then they wouldn't have the embarrassment and huge lawyers fees they now face.

Just be quiet, and keep all your comments to yourself. You self hating Jew.

35

 Dec 13, 2016 at 11:02 AM Anonymous Says:

FACTS
A. Defendants Engaged in Voluminous Manipulative Trading.
13.
From at least January 2014 to the present, Defendants orchestrated voluminous intentionally manipulative trading in stocks traded on U.S. securities exchanges, including the NASDAQ Stock Market (“NASDAQ”), the New York Stock Exchange (“NYSE”) and the
4
Case 2:16-cv-09130 Document 1 Filed 12/12/16 Page 5 of 28 PageID: 5
NYSE MKT. In the two-year period between 2014 and 2015, Defendants engaged in coordinated stock trading in at least 36 accounts that they controlled at 9 separate brokerage firms (the “Coordinated Accounts”).
14.
Defendant Taub was the principal orchestrator of the manipulative scheme. Taub traded in the Coordinated Accounts in his name, as well as in the name of his associates, regardless of whether he was designated as an authorized trader in those accounts. Taub instructed Defendant Shmalo as to how to execute the manipulative tactics and supervised Shmalo’s trading. Taub also provided most or all of the funds for the securities accounts that Defendants used in the manipulative trading scheme, and Taub received the majority of profits derived from the scheme.
15.
Defendant Shmalo traded securities

36

 Dec 13, 2016 at 11:30 AM JoshB Says:

Reply to #31  
Yid and Active Prosecutor Says:

nobody gets charged with this type of crime, they were targeted since they're frum Yidden"

You are pathetically incorrect

This was tongue in cheek, I guess you just don't get sarcasm.

37

 Dec 13, 2016 at 05:51 PM Neverjudge Says:

Reply to #7  
JoshB Says:

How do I donate to the pidyan shvuyim campaign? nobody gets charged with this type of crime, they were targeted since they're frum yidden. Just like the others, everybody spies for friends, and 1924 bank laws should not be considered bank fraud.

Cool guy, using sarcasm, I'm sure you know exactly what's considered legal on wall Street and what's allowed. Some things are not funny, keep your sarcasm for situations that you actually know something about.

38

 Dec 14, 2016 at 02:45 PM Eli Says:

Reply to #20  
Anonymous Says:

Would the Yidden posting "innocent until proven guilty!" and "they give a lot of tzedokah!" say the same thing about a black or Muslim person accused of a crime? The hypocrisy of some of my fellow Jews makes me sick.

Chazal say to judge a Jew favorably, not a Muslim or African American. Not my problem you dont give a hoot what Chazal say

39

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