Former Beverly Hills stockbroker and B-D owner Todd Ficeto, 52, of Marion, Ohio, has been found guilty on several counts of participating in a stock manipulation scheme designed to pump up the reported profits of hedge funds that fraudulently caused investors approximately $200 million in losses.
The U.S. Attorney's Office for the Central District of California, which brought the case in Los Angeles, said that as president of Hunter World Markets, which he co-owned with a Florian Wilhelm Jürgen Homm, Mr. Ficeto directed billions of shares of penny stocks to hedge funds operated by Mr. Homm through his Absolute Capital Management Holdings. Mr. Homm was indicted in March 2013 on charges of securities fraud and wire fraud after he was arrested in Italy. He later fled to Germany and is a fugitive.
For his role in the case, Mr. Ficeto was found guilty of one count of conspiracy to commit securities fraud and wire fraud, seven counts of securities fraud, two counts of investment adviser fraud, one count of money laundering conspiracy, five counts of unlawful money transactions, one count of obstruction of justice, and one count of making false statements.
The government charged that Mr. Ficeto, Mr. Homm and other co-conspirators fraudulently manipulated the penny stocks to inflate and artificially prop up their prices to exaggerate the purported profitability of the Absolute Capital hedge funds. As a result, the government said, the co-conspirators were able to sell their own shares of the penny stocks at the inflated prices to the hedge funds, which also fraudulently overstated the performance of the hedge funds which, in turn, generated substantial performance fees and other compensation for Mr. Homm and his co-conspirators.
During the time these events took place, between September 2004 and September 2007, Mr. Ficeto also engaged in unlawful monetary transactions by sending nearly $10 million of illicit proceeds to an account in the Cook Islands days before his testimony before the Securities and Exchange Commission, and then lied to the SEC about the Cook Islands account, the government said in a release.
(More: Merrill Lynch loses $1 billion Beverly Hills team)
A sentencing hearing for Mr. Ficeto is scheduled for Oct. 7. Each charge of conspiracy to commit securities fraud carries a statutory maximum penalty of 25 years in federal prison. The money laundering charges each carry a maximum penalty of 10 years in federal prison. Each charge of investment adviser fraud, obstruction of justice and false statements carries a maximum statutory penalty of five years in federal prison, the government said.