Slava Volman of Garden City, New York pleaded guilty to securities fraud, conspiracy to commit securities fraud and conspiracy to commit money laundering, all while associated with the former firm Donald & Co. Securities, Inc., which is no longer in business. As a result, Volman will serve one year and one day in prison.
According to Slava Volman's BrokerCheck report, FINRA had barred Volman from the securities industry following a Securities and Exchange Commission public administrative proceeding against the broker. The SEC alleged that from 1999 through 2002, while associated with Donald, Volman engaged in deliberate fraudulent practices including the price manipulation of two penny stocks.
These two penny stocks—telephone service firm Elec Communications Corp. and Italian cheese importer Classica Group—were also known as "house stocks," as Volman had a secret interest in their performance. In a classic "pump-and-dump" scheme, Volman perpetrated the fraudulent scheme by artificially inflating the price of both stocks through patently false and misleading statements to customers, enticing investors through boiler-room tactics to purchase the stocks based on inflated price predictions with no basis in fact. The SEC also found that Volman made it difficult for customers to sell either stock.
The pump-and-dump scheme becomes profitable for the broker or operator when the scheme's perpetrators first "pump" up the share price by selling the stock to unsuspecting customers. The operators retain a large portion of the shares and ride the increased market price created by customers purchasing shares. Then when the stock price reaches a target point, the operators "dump" or sell their overpriced shares en masse—the stock's value thereby drops dramatically, causing significant financial losses for unknowing investors. The operators escape with significant profits and unsuspecting investors are left with worthless stock.
In the late 1980s and 1990s numerous brokerage firms, including Stratton Oakmont and Duke & Co. were found to have engaged in pump and dump schemes defrauding investors out of millions.
News: Ex-Donald & Co. broker sentenced to 1 year for stock scheme