This story was updated on March 20, 2018.
In a case involving 100 investors who lost more than $15 million, broker Christopher Cervino of Franklin Lakes, N.J., and Sheik F. Kahn, a registered investment adviser in Las Vegas, Nev., have been found guilty of securities fraud by a federal court in New York.
Ms. Kahn and Mr. Cervino artificially inflated the market for VGTel, Inc., a publicly traded over-the-counter company,
according to a release from the office of the U.S. Attorney for the Southern District of New York.
In addition to increasing the stock price from approximately $.25 per share in April 2012 to as much as $1.90, the two also inflated trading volume, which increased their ability to raise private investments in the stock.
The fraudulent scheme was conceived and led by Edward Durante, who pleaded guilty in August 2016 to various crimes related to VGTel, including conspiracy, securities fraud, money laundering and perjury. According to the U.S. Attorney, Mr. Durante made at least two cash payments to Mr. Cervino totaling $35,000, in addition to the substantial commissions Mr. Cervino received for executing trades in VGTel stock. For her part, Ms. Kahn received more than $400,000 from Mr. Williams1982Durante, including more than $100,000 in payments for liquidating her clients' investments in annuities so the proceeds could be invested in VGTel shares. Ms. Khan's clients lost virtually all the money they invested in those shares, the release said.
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Mr. Cervino and Ms. Kahn were each convicted of one count of conspiracy to commit securities fraud, one count of securities fraud, one count of conspiracy to commit wire fraud, and one count of wire fraud. In addition, Ms. Kahn also was convicted of investment adviser fraud and aggravated identity theft crimes. If the maximum sentences are imposed for all convictions, they each face 20 years in prison.
