Joseph Taub, New Jersey-based securities trader, pleaded guilty today to orchestrating a massive, long-standing market manipulation scheme. He also admitted to tax fraud that netted more than $17 million in illegal profits, U.S. Attorney Craig Carpenito announced.
Taub, 41, of Clifton, New Jersey, pleaded guilty before U.S. District Judge John Michael Vazquez in Newark federal court to counts four and five of a superseding indictment. He admitted to securities fraud and conspiracy to defraud the United States. Sentencing is scheduled for December 1, 2020.
Sean Greenwald pleaded guilty to his role in the scheme on Feb. 21, 2018 and awaits sentencing.
According to court documents, the conspiracy lasted from 2014 to 2016. Taub and others conspired to manipulate the securities prices of numerous public companies.
Taub coordinated trading in dozens of brokerage accounts which he secretly controlled and used “straw accounts” that were held in other names to conduct much of his trading. Taub funded many of these straw accounts and used the straw account holders to conceal the scheme from regulators and law enforcement.
To manipulate the price of securities, Taub engaged repeatedly in a series of contemporaneous transactions designed to artificially influence the market price of the securities of various publicly traded companies. He also induced other market participants to trade in those securities based on the false impression that was real market interest in the securities. He used “Run Based Manipulation” and “Order Based Manipulation” methods.
Run Based Manipulation is a type of securities manipulation where the manipulator takes either a long or a short position in a security. The manipulator then enters orders or trades in a manner designed to inflate or deflate the price of the security, at the same time trying to attract others to trade the security then finally reverse their position at the inflated or deflated price.
A common feature of Run Based Manipulation is that the manipulator profits directly from the manipulated market by exploiting investors who unknowingly bought at inflated prices or sold at depressed prices.
Order Based Manipulation involves orders, sometimes but not always accompanied by trades. The point manipulation is designed to give other market participants a false signal about the security’s demand or supply.
According to statements made in court, Taub defrauded the United States by hiding the identities of those who actually controlled the straw accounts, and who reaped the majority of the profits from the scheme, from the brokerage firms and the IRS. As a result, the profits from the straw accounts were taxed at the lower tax rates applicable to the straw account holders instead of the higher tax rates applicable to Taub, which allowed Taub to avoid $394,424 in taxes.
Securities fraud carries a maximum potential penalty of 20 years in prison and a $5 million fine. Conspiracy to defraud the United States carries a maximum potential penalty of 5 years in prison and a $250,000 fine, or twice the gross gain or loss from the offense. Under the terms of the plea agreement, if accepted by the court, Taub will receive a sentence of 18 months in prison, will forfeit $17.1 million, and will be ordered to pay restitution in the amount of $394,424 to the IRS.
The Department of Justice has also reached a settlement of its civil forfeiture case against assets acquired by Taub and his family using the proceeds of the market manipulation scheme. Under the terms of the settlement, Taub and his family members agreed to forfeit all assets subject to the pending forfeiture complaint in which they have a potential interest. Taub is also required to cooperate with and assist the Justice Department in the orderly transfer, management, and disposition of the relevant assets.
U.S. Attorney Carpenito credited special agents of the FBI, under the direction of Acting Special Agent in Charge Joe Denahan in Newark, special agents of the IRS – Criminal Investigation, under the direction of Special Agent in Charge Michael Montanez in Newark, and special agents of the U.S. Attorney’s Office, District of New Jersey, with the investigation. He also thanked the Securities and Exchange Commission’s New York Regional Office, under the direction of Marc P. Berger, for its assistance in this investigation.
The government is represented by Criminal Division Deputy Chief Daniel V. Shapiro; Senior Trial Counsel Catherine R. Murphy and Assistant U.S. Attorney Jennifer S. Kozar of the U.S. Attorney’s Office Economic Crimes Unit in Newark; and Unit Chief Sarah Devlin, of the U.S. Attorney’s Office Asset Recovery and Money Laundering Unit.
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