Frederick L. Sharp, Luis Carrillo, Courtney M. Kelln, Mike K.G. Veldhuis, and Paul Sexton Indicted for Long-Running Pump-and-Dump Schemes
Four Canadian nationals and one former California attorney, who is believed to be residing in Mexico, were indicted on Jan. 9, 2024 in connection with long-running international securities fraud schemes in which they sold millions of shares in multiple microcap—or “penny”—stock companies during pump-and-dumps, generating at least tens of millions of dollars in illicit proceeds.
The indictment charged Frederick L. Sharp, 71, and Courtney M. Kelln, 43, both of British Columbia, with two counts each of securities fraud and conspiracy to commit securities fraud. The indictment further charged Luis Carrillo, 50, previously of California, and Mike K.G. Veldhuis, 43, and Paul Sexton, 55, both of British Columbia, with one count each of securities fraud and conspiracy to commit securities fraud.
Sharp, Carrillo, Veldhuis and Kelln were previously charged in a criminal complaint.
Also among the named co-conspirators was Roger Knox, who founded and ran the Swiss asset management firm Wintercap SA and who was sentenced for securities fraud and conspiracy to commit securities fraud in October 2023, and Richard Targett-Adams, who resided in France and worked for Knox. Targett-Adams was responsible for several back-office tasks for Wintercap.
According to the charging documents, Sharp—who used the codename “Bond”—allegedly operated a sophisticated platform for at least six years that provided a variety of services to individuals seeking to conceal their identities in contravention of the securities laws when selling penny stock shares during pump-and-dumps.
In exchange for fees, the array of services Sharp offered included (i) forming and providing offshore nominees to hold shares for undisclosed control persons; (ii) providing and administering encrypted communications networks for use by control persons (known as “xphone” and “xmail”); (iii) facilitating the deposit of stock through Wintercap in blocks of less than five percent via Sharp’s nominees; (iv) administering a proprietary web-based accounting system that tracked clients’ total stock holdings, sales and proceeds (known as “Q”); and (v) facilitating the payment of illegal stock sale proceeds to accounts around the world at his clients’ direction, including through the use of fake invoices that concealed the true nature of the payments.
In or about July 2013, Sharp described his services as follows: “The service provided is comprehensive; it is not limited to trading. It includes pyaments [sic], loans, private placements and keeping clients out of jail.”
Kelln, who worked for Sharp, allegedly facilitated the use of Sharp’s platform by undisclosed control persons—including Carrillo, Veldhuis and Sexton—by preparing and/or obtaining false and misleading documents that were provided to transfer agents and brokers to facilitate the breakdown and transfer of Sharp’s clients’ shares to Sharp’s offshore nominees, as well as the shares’ subsequent deposit with Wintercap to facilitate their sale to unsuspecting investors.
Carrillo, Veldhuis and Sexton are alleged to have been “undisclosed control persons” who orchestrated pump-and-dumps using Sharp’s platform and through Wintercap. The steps in the alleged schemes generally involved:
(a) Acquiring control over a significant portion, if not all, of a penny-stock issuer’s outstanding shares and a majority, if not all, of the issuer’s float while simultaneously failing to file public disclosures when required by the securities laws.
(b) Transferring the unrestricted shares to nominee entities in blocks of less than five percent of the total outstanding shares of the issuer in order to evade and circumvent the securities laws and to evade scrutiny by brokers. While the nominees were officially owned by third-party individuals, in reality, the control persons (i.e., Carillo, Veldhuis and Sexton) retained control over the shares.
(c) Transferring the shares held by the nominee entities to Wintercap, which in turn deposited the shares for trading at multiple brokerage firms around the world in Wintercap’s name. Knox often sent each nominee entity’s shares to a different broker, thereby giving the false appearance that each nominee entity was a separate client with its own individual position of less than five percent of the issuer’s outstanding shares, assisting the control persons in evading disclosure obligations and avoiding triggering direct inquiries and potential rejections by the brokerage firms. Know often provided false and/or misleading representations to the brokers indicating that the stock was not beneficially owned or controlled by control persons and/or affiliates of the issuer.
(d) Directing Wintercap to dump—i.e., sell—the shares during multifaceted promotional campaigns funded and organized by the undisclosed control persons, which campaigns at times included “boiler rooms” cold-calling unsuspecting U.S. investors outing the stocks and soliciting purchases and distributing the illicit proceeds from Wintercap at the undisclosed control persons’ direction. Knox and Targett-Adams typically took direction from the control persons over encrypted messaging systems using codenames regarding when and how much stock to sell. Following the “dump”, Knox swept the stock sale proceeds from the brokerage accounts into Wintercap’s bank accounts. Wintercap then retained a small portion of the proceeds as Wintercap’s fees and distributed the remainder of the proceeds at the control person’s direction, including for the control persons’ personal benefit and to support the scheme.
The indictment identifies three issuers whose shares were sold during pump-and-dumps allegedly led by Carrillo:
- OneLife Technologies Corp. (ticker OLMM), millions of shares of which were sold between November 2017 and October 2018 through Wintercap, generating proceeds of approximately $5.2 million;
- Garmatex Holdings, Ltd. (ticker GRMX) – now Evolution Blockchain Group Inc (EVBC) – millions of shares of which were sold between March and May 2017 through Wintercap, generating proceeds of approximately $5 million; and
- Pure Snax International, Inc. (ticker PSNX) – now iQSTEL Inc (IQST) – millions of shares of which were sold between November 2015 and September 2016 through Wintercap, generating proceeds of approximately $1.6 million.
The indictment also identifies one issuer whose shares were sold during a pump-and-dump allegedly led by Veldhuis and Sexton:
- Vitality BioPharma, Inc., formerly known as Stevia First Corp. (tickers VBIO & STVF) – now Range Impact Inc (RNGE) – millions of shares were sold between May 2016 and September 2018 through Wintercap, generating proceeds of over $17 million.
The charges of securities fraud each provide for a sentence of up to 20 years in prison, three years of supervised release and a fine of $5 million. The charges of conspiracy to commit securities fraud each provide for a sentence of up to five years in prison, three years of supervised release and a fine of $250,000, or twice the gross gain or loss, whichever is greater.
Sentences are imposed by a federal district court judge based on the U.S. Sentencing Guidelines and other statutory factors.
To date, no information in the court docket indicates that any of the defendants have yet been arrested.
From 2012 to about July 2020, Frederick Sharp was at the center of a massive scheme to assist individuals with committing securities fraud by orchestrating sophisticated pump-and-dump schemes involving the concealing of control of securities of several microcap companies, netting tens of millions of dollars in illicit proceeds at the expense of the investing public.
For years, many in the penny stock industry followed the stock promotions that accompanied these schemes, often wondering how such obvious frauds could continue to go on for years without consequences. Most of the schemes were so obvious just by the set-ups that they could often be identified before a single share traded, with savvy researchers doing just that, including exposing some of the key players (like Frederick Sharp and Luis Carrillo) years before they ended up being charged.
The scheme started to really unravel in 2018 when Roger Knox was arrested and charged, perhaps thanks to the cooperation of some individual who was arrested and charged prior to Knox. According to the FBI, between 2015 and 2018, Knox illegally sold stock through Silverton SA (later renamed to Wintercap) for control groups using nominee shareholders (fake shareholders that held the stock in name only) for more than 100 different Issuers allowing those control groups to suck over $164 million out of the market.
Since Knox’s arrest, there has been a steady stream of litigation filed against groups and individuals that used the services of Knox and Frederick Sharp or were involved in promoting the Knox/Sharp-linked issuers. We’ve followed many of the cases that made references to Knox and/or Sharp over the past 3 years, including charges against:
Jay Scott Kirk Lee, Geoffrey Allen Wall, and Benjamin Thompson Kirk
More Individuals Charged in Billion Dollar Penny Stock Pump and Dump/Money Laundering Operation
Francis Biller, Raymond Dove, and Chester Alvarez
Undercover Sting Takes Down Francis Biller, Raymond Dove, and Chester Alvarez in Boiler Room Scheme
Ronald Bauer, Craig James Auringer, Adam Christopher Kambeitz, Alon Friedlander, Massimiliano Pozzoni, Daniel Mark Ferris, Petar Dmitrov Mihaylov, David Sidoo, Domenic Calabrigo, Curtis Lehner, Hasan Sario, Courtney Vasseur, Dean Shah, Henry Clarke, and Julius Csurgo
SEC Charges 15 Individuals in a $194 Million International Penny Stock Fraud
Ubong Uboh and Tyler Crockett
SEC Charges Ubong Uboh and Tyler Crockett for Using a Call Room to Manipulate Stocks
Joseph Padilla
Joseph Padilla Arrested and Charged in $7 Million Securities Fraud
James M Agrim
SEC Charges James P. Anglim in Connection with Fraudulent Scheme to Manipulate Stock Prices
Ulrik Debo, Kenneth Ciapala, Anthony Killarney, Steve Bajic, Rajesh Taneja, Ciapala, Christopher Lee McKnight, and Andrew Dale Wise
Not to mention several other cases that we did not write about in our blog.
Yet, despite all of the criminal cases brought by the DOJ and civil cases brought by the SEC, many of the defendants remain at large, free to continue to evolve their schemes, using new offshore money laundering groups, new nominees, new service providers, new brokers, and new stock promoters. For every Frederick Sharp and Roger Knox and stock promotion group that falls, somebody always seems to be waiting in the wings to help pick up the pieces and provide similar services.
To speak with a Securities Attorney, please contact Brenda Hamilton at 200 E Palmetto Rd, Suite 103, Boca Raton, Florida, (561) 416-8956, or by email at [email protected]. This securities law blog post is provided as a general informational service to clients and friends of Hamilton & Associates Law Group and should not be construed as and does not constitute legal advice on any specific matter, nor does this message create an attorney-client relationship. Please note that the prior results discussed herein do not guarantee similar outcomes.
Hamilton & Associates | Securities Attorneys
Brenda Hamilton, Securities Attorney
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Boca Raton, Florida 33432
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