The Feds continued charging in a complex stock manipulation scheme that even has two co-conspirators in a stock manipulation conspiracy. Recently , We at Theindustryspread , had published about hacking being a trillion dollar business and now this issue has been popped up.
“Pavandeep Bakhshi, 41, of the United Kingdom, is charged by complaint with one count of conspiracy to commit securities fraud and one count of securities fraud. Bakhshi was arrested Saturday evening at JFK Airport after arriving on a flight from London. Bakhshi’s initial court appearance is today (December 10) at 2:30 p.m. EST before U.S. Magistrate Judge Leda Dunn Wettre for the District of New Jersey.” A press release from the US Department of Justice.
It was the latest move in an ever evolving story.
Magistrate Judge Leda Dunn Wettre
A magistrate, like the sort of judge Leda Dunn is a junior judge. While the President appoints full-time federal judges, a magistrate is appointed by a majority vote of that district’s, in this case the District of New Jersey, federal district and serve terms of eight years if full-time, or four years if part-time, and may be reappointed.
Judge Dunn Wettre was appointed to the court on April 2, 2015, and her term will expire on April 1, 2023.
The US Attorney’s Office for the District of New Jersey
Specifically, the Assistant Attorney General Brian A. Benczkowski of the Justice Department’s Criminal Division and U.S. Attorney Craig Carpenito for the District of New Jersey announced the indictment.
The US Attorney’s Office for the District of New Jersey- the New Jersey office is one of ninety-three of these regional or district US Attorney’s Offices– is leading the prosecution of this case.
In New York, there are four districts, including the southern district, which includes Wall and Broad, and where most trading related crimes occur.
Background
The release then detailed the scheme.
“From May 2015 through September 2017, Bakhshi and co-conspirators Parmjit Parmar, aka ‘Paul Parmar’ (‘Parmar’), Sotirios Zaharis, aka ‘Sam Zaharis’, and Ravi Chivukula, allegedly orchestrated an elaborate scheme to defraud a private investment firm and others out of hundreds of millions of dollars in connection with the funding of a transaction to take private a healthcare services company (Company A) traded publicly on the London Stock Exchange’s Alternative Investment Market.
“To fund the transaction, the private investment firm put up $82 million and a consortium of financial institutions put up another $130 million. The scheme allegedly utilized fraudulent methods to grossly inflate the value of Company A and trick others into believing that Company A was worth substantially more than its actual value.”
The Fugitives
As the case unfolded, some defendants have become fugitives.
“The United States filed a criminal complaint against Parmar, Zaharis and Chivukula on May 16 for their alleged roles in the scheme. Zaharis and Chivukula currently are fugitives. The United States also filed a separate civil complaint on the same date seeking forfeiture of four properties that Parmar owns or controls, including a house in Colts Neck and three apartments in New York City. Separately, the U.S. Securities and Exchange Commission filed a civil complaint on May 16 against Parmar, Zaharis and Chivukula.” The press release noted further.
The Publicly Traded Company
The criminal complaint noted that the company was publicly traded: “‘Company A’ was a publicly-traded company that, through a web of operating subsidiaries, provided outsourced revenue cycle management (‘RCM’), physician practice management, and other related services to hospitals and medical practices in the United States. Company A was incorporated in Delaware in or around September 2014 for the purpose of becoming a holding company for the ‘Operating Company,’ which owned several subsidiary entities engaged in the businesses referenced above.” The indictment stated. “In or around December 2014, Company A’s securities began trading on the Alternative Investment Market (‘AIM’) of the London Stock Exchange (‘LSE’). Company A was later taken private through a domestic merger transaction consummated in the United States and described below, which closed on or about January 30, 2017
“The complaint alleges that to present a positive picture of the company’s financial wealth, the conspirators allegedly sought to raise tens of millions of dollars in the public markets, purportedly to fund Company A’s acquisitions of various operating subsidiaries. In reality, the complaint alleges, a number of those entities either did not exist or had only a fraction of the operating income attributed to them. The conspirators allegedly funnelled the proceeds of these secondary offerings through bank accounts they controlled and used the money for a variety of purposes that had nothing to do with acquiring the purported targets. The money from one of the offerings was instead used to make it appear as if the operating subsidiary had substantial customer revenue when, in fact, the funds were simply transfers of the money that had been raised in the secondary offering, the complaint alleges. The conspirators allegedly went to great lengths to make it appear that these funds were revenue, concocting phony customers and altering bank statements to make it appear as if the funds were coming from customers.”
Other Wrongdoing
The US Attorney’s Office also said that the conspirators allegedly:
- Created fictitious operating companies that Company A purportedly acquired in sham acquisitions;
- Falsified and fabricated bank records of subsidiary entities in order to generate a phony picture of Company A’s revenue streams;
- Generated fake income streams and phony customers of Company A and its subsidiaries; and
- Made material misrepresentations and omissions to the private investment firm and others.
“The defendants’ alleged actions caused the private investment firm and others to value Company A at more than $300 million for purposes of financing the transaction to take the company private.” The US Attorney’s Office also said in the press release.
As rightly put by Ben Franklin, “Justice will not be served until those who are unaffected are as outraged as those who are..”
