(WOIO) - Cleveland Division of the Federal Bureau of Investigation (FBI) and the United States Attorney for the Northern District of Ohio announce the federal arrest of 58-year-old Izak Sirk De Maison (aka Izak Zirk Engelbrecht, aka Zirk Engelbrecht), and 59-year-old Stephen J. Wilshinsky, in Los Angeles, California on September 18.
According to authorities, De Maison, a self described "merchant banker", devised a scheme and artifice to defraud investors by creating public "shell" companies, executing a merger of an emerging business with the shell to create a publicly traded company, and then paying undisclosed kickbacks to brokers, including Wilshinsky, in exchange for using their clients' funds to purchase shares of the resulting penny stock.
The public companies that De Maison created typically conducted minimal actual business activity and had little revenue with no profit. To generate income from the shell companies, De Maison utilized various schemes to sell his company shares to generate personal income. De Maison utilized the same individuals over and over in his schemes.
De Maison is accused of conspiring with brokers, including Wilshinsky, to ensure that any time he wanted to sell free trading shares on the open market, there would be an available buyer. Despite typical low volume trading in the stocks controlled by De Maison, when he wanted to sell on the open market, orders were filled almost instantaneously. This immediate fulfillment was because De Maison conspired with brokers who had some discretion to make trades in their investor/clients' accounts.
De Maison paid brokers an undisclosed "kickback", typically fifty percent of the total sale price, in exchange for the brokers using the investor/clients' accounts the brokers controlled to purchase De Maison's stocks on the open market. It is unlawful to not disclose the kickbacks to the investor/clients and to not disclose to the investor/clients that their accounts were, in fact, trading in such risky penny stocks.
Authorities say that De Maison, at least for some period of time, conspired with others to inflate the stock price point through false reporting and manipulative business activities, all of which affected the stock price and helped De Maison achieve the maximum value out of the shares he owned.
De Maison and Wilshinsky are both charged with conspiracy to commit wire fraud and securities fraud. De Maison is also charged with wire fraud, securities fraud, money laundering and use of interstate commerce for purpose of securities fraud. This matter is considered an on-going investigation. Additional charges are expected against these two individuals and additional individuals are expected to be charged for their roles in this multi-million dollar conspiracy. A number of victims are from the Northern Ohio area.
"These two are nothing more than sophisticated thieves," said Special Agent Stephen D. Anthony. "Putting a suit on and calling it investing does not make stealing acceptable. The FBI will continue to work with the SEC to make sure these two and their additional conspirators answer for this multi-million dollar fraud."
"The FBI and SEC continue to work tirelessly to investigate financial fraud," said Steven M. Dettelbach, U.S. Atty for the Northern District of Ohio. "We will prosecute cases as they are brought to us to ensure faith in the markets and to seek justice for those who have been victimized."
De Maison and Wilshinsky were taken into custody by FBI agents from the Los Angeles office at approximately 10 a.m. EST without incident.
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