By Kathianne Boniello
A Bayside man was arrested and charged with securities fraud last week after allegedly making himself and a partner more than $1 million in an Internet scam that used e-mails to drive up the price of penny stocks, the U.S. attorney for the Southern District said last Thursday.
U.S. Attorney Mary Jo White announced the charges against James Sheret Jr., 31, of Bayside, and Glenn Conley, 31, of Oregon, last week in the nationwide scam that allegedly ran from November through February and involved about 60 companies.
The two men are accused of sending hundreds of thousands of e-mails promoting the investment prospects of thinly traded, largely dormant microcap companies that they had bought stock in.
The pair disguised the e-mail to make it seem as if they were coming from Internet service provide America Online, the complaint said.
Sheret and Conley were charged with earning $339,000 in illegal profits from the scam in the complaint, and a spokesman at the U.S. attorney's office said the pair were being accused of making an additional $800,000 as well.
Sheret could not be reached for comment as of press time Tuesday.
If convicted, Sheret and Conley could face up to five years in prison and a maximum fine of $250,000 or twice the amount they made in the scam.
“This is the dark side of the Internet,” White said in a statement. “Determined fraudsters can swindle a virtual audience by taking large positions in thinly traded stocks, disseminating hundreds of thousands of spam e-mails touting those stocks, and then sell them into the fraudulently inflated market they have created.”
White described the scheme as similar to boiler room scams in which dozens of stockbrokers at a time pitch stocks to investors to drive up prices.
The boiler room scam “takes on a new dimension because of the ability online to reach thousands, if not millions, of investors with a single keystroke.”
Lewis Schiliro, assistant director in charge of the Federal Bureau of Investigation's New York office, said “this case represents the marriage of an old scheme with modern technology.
“Unscrupulous stock manipulators should be on notice that to the law enforcement community,” he said “it's the message, not the medium, that matters.”
The Securities and Exchange Commission also brought civil charges against the men.
