Department of Justice

U.S. Attorney’s Office

District of New Jersey

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FOR IMMEDIATE RELEASE

Monday, September 12, 2016

Nevada Stock Promoter Admits Role In $33 Million Microcap Stock Manipulation Scheme

NEWARK, N.J. – A Henderson, Nevada, man today admitted his role in a stock market manipulation scheme that artificially inflated the stock price of four publicly traded companies through manipulative trading and other fraudulent means, U.S. Attorney Paul J. Fishman announced. 

Nathan Montgomery, 35, pleaded guilty today before U.S. District Judge Jose Linares in Newark federal court to an information charging him with conspiracy to commit securities fraud. 

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

From 2008 through 2010, Montgomery, a penny stock promoter, participated in an extensive “pump-and-dump” scheme in which he and others fraudulently inflated the prices of certain shares in order to sell them later at artificially inflated prices. The scheme involved four public companies: BioNeutral Group Inc. (BONU), NXT Nutritionals Holdings Inc. (NXTH), Mesa Energy Holdings Inc. (MSEH), and Clear-Lite Holdings Inc. (CLRH) (collectively, the “Target Companies”).

As part of the scheme, Montgomery and others first obtained control over large blocks of the free trading shares of the Target Companies. Next, Montgomery and others “pumped” the price of those shares by, among other things, engaging in manipulative trading of the stocks of the Target Companies and disseminating promotional materials encouraging others to purchase them. After pumping the stocks, Montgomery and the other conspirators “dumped” them by selling large volumes of the Target Companies’ stock to victim investors. The target companies’ stock price would then drop, resulting in losses to the victims. 

In order to fraudulently inflate the price and volume of the Target Companies’ stocks, Montgomery paid cash kickbacks to Donald Toomer, an investment advisor in Las Vegas, so that Toomer would purchase the Target Companies’ stock on behalf of his clients. The purpose of those purchases was to, among other things, create the false appearance of market interest and demand in the stock; build trading volume that would be attractive to potential investors who would later receive promotional materials about the stock; and generate income to fund the promotional campaigns, including email blasts and newsletters, that occurred in the later phases of the scheme. Additionally, Montgomery and other conspirators engaged in coordinated trading of the Target Companies’ stock using various brokerage accounts that they owned or controlled, including the accounts of friends, family and other third parties.           

The scheme collectively generated approximately $33 million in illicit trading proceeds, of which Montgomery received approximately $20 million.

The conspiracy charge to which Montgomery pleaded guilty carries a maximum potential penalty of five years in prison and a $250,000 fine, or twice the gain or loss from the offense. Sentencing is scheduled for Dec. 20, 2016.

On Dec. 15, 2015, Samuel DelPresto of Holmdel, New Jersey, pleaded guilty to one count of conspiracy to commit securities fraud for his role in the scheme.  On Dec. 21, 2015, a federal grand jury returned a five-count indictment against Toomer charging him with conspiracy to commit securities fraud and investment adviser fraud and several counts of securities fraud and investment adviser fraud. That matter is currently pending before Judge Linares. A trial date has not yet been set.   

U.S. Attorney Fishman credited special agents of the FBI, under the direction of Special Agent in Charge Timothy Gallagher in Newark, for the investigation leading to Montgomery’s guilty plea. He also thanked the U.S. Securities and Exchange Commission’s New York Regional Office, under the direction of Andrew Calamari, for its assistance in this matter.

The government is represented by Assistant U.S. Attorney Nicholas P. Grippo of the U.S. Attorney’s Office Economic Crimes Unit.

Defense Counsel: Mark Bailus Esq., Las Vegas, Nevada, Marvin G. Pickholz Esq., New York, William B. Pollard III Esq., New York

FBI Boston Division #News Release:

Stock Promoter Indicted for Conspiring to Commit Securities Fraud

U.S. Attorney’s OfficeSeptember 02, 2015

District of Massachusetts(617) 748-3100

BOSTON—A Colorado stock promoter was charged today in U.S. District Court in Boston with conspiring to commit securities fraud by promoting shares of a company and then secretly selling them, without disclosing that he and his co-conspirators controlled almost all of the available shares.

Scott F. Gelbard, 39, a former resident of Lone Tree, Colo., who has since moved to Canada’s Pacific Northwest, was indicted on one count of conspiracy to commit securities fraud and one count of securities fraud.

According to the indictment, Gelbard and his business partners owned and operated Regency Group, LLC, a stock-promotion company in Colorado. Gelbard allegedly hired a disbarred attorney to set up brokerage accounts in the name of phony Panamanian entities that the former attorney controlled so that Gelbard and his partners could secretly accumulate, and then sell, stock in companies that they were promoting. One of those companies was Greenchek Technology, Inc., a firm that purportedly made gasoline-emission-reduction products. Beginning in 2008, Gelbard and his partners allegedly began transferring Greenchek shares they had acquired to the entities controlled by the former attorney. They then intentionally failed to file required disclosures that they had accumulated over 85% of Greenchek’s available shares, despite U.S. Securities and Exchange Commission requirements that such disclosures be made when ownership of a company’s stock exceeds five percent.

As alleged in the indictment, Gelbard then hired a company to distribute certain promotional materials concerning Greenchek, including a series of press releases issued between February and June 2009. Beginning in February 2009, Gelbard and his partners began selling the stock held in the names of the phony Panamanian entities, generating more than $4 million in proceeds by June 2009. At Gelbard’s direction, the former attorney then laundered the proceeds through accounts in Panama and transmitted the money to accounts that Gelbard and his partners controlled or to pay debts that they owed. A federal grand jury in Massachusetts returned the indictment here because a number of victims lived in the Commonwealth.

The charging statute provides for a sentence of no greater than 20 years in prison, three years of supervised release, and a fine of the greater of $250,000 or twice the gross gain or loss. Actual sentences for federal crimes are typically less than the maximum penalties. Sentences are imposed by a federal district court judge based upon the U.S. Sentencing Guidelines and other statutory factors.

United States Attorney Carmen M. Ortiz; Steven Osborne, Special Agent in Charge of the Internal Revenue Service Criminal Investigations, Denver Field Office; and Joseph R. Bonavolonta, Acting Special Agent in Charge of the Federal Bureau of Investigation, Boston Field Division, made the announcement today. The case is being prosecuted by Assistant U.S. Attorney Eric P. Christofferson of Ortiz’s Economic Crimes Unit.

The details contained in the indictment are allegations. The defendant is presumed innocent unless and until proven guilty beyond a reasonable doubt in a court of law.

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