A former Beverly Hills stockbroker was sentenced to six years in federal prison for scheming to manipulate penny stock prices to inflate the reported profits of his co-conspirator’s hedge funds. The scheme generated millions of dollars in fees and commissions for the defendant, and caused investors to lose more than $215 million in when the funds collapsed, authorities said.
Todd Michael Ficeto, 53, of Marion, Ohio, was sentenced on July 6 by United States District Judge Virginia A. Phillips, who also ordered him to pay $215.8 in restitution. During a 17-day trial that concluded in July 2019, a jury found Ficeto guilty of 18 felonies including one count of conspiracy to commit securities fraud and wire fraud, seven counts of securities fraud, two counts of investment adviser fraud, one count of money laundering conspiracy, five counts of money laundering, one count of obstruction of justice and one count of making false statements.
At the July 6 sentencing hearing, Phillips described the scheme as “serious” and “far-reaching” and ordered Ficeto to begin serving his sentence this week. Ficeto has waived his right to appeal his conviction and sentence.
Ficeto was the president of Hunter World Markets, a Beverly Hills-based broker-dealer that he co-owned with German financier Florian Wilhelm Jürgen Homm. Homm founded Absolute Capital Management Holdings, a Cayman Island-based company that managed eight hedge funds and which Homm operated from Mallorca, Spain. Homm, 60, was indicted in March 2013 on charges of securities fraud and wire fraud after he was arrested in Italy, but later fled to Germany and remains a fugitive.
Between September 2004 and September 2007, Ficeto used HWM’s investment bureau to find small, private companies that could be converted into publicly traded penny stock businesses. Once the penny stock companies went public, Ficeto arranged financing deals in which Homm invested millions of dollars from the Absolute Funds to acquire a majority of the new company’s stock. Based on those financial deals, Ficeto and Homm paid themselves substantial placement agent fees and issued themselves and co-conspirators millions of shares of the newly created penny stock companies.
Ficeto also caused existing shareholders in the penny stock companies to enter into “lock-up agreements” that prevented them from trading those companies’ shares. Meanwhile, Ficeto, Homm and their co-conspirators freely traded the shares they controlled, and executed their scheme by trading the penny stocks – through HWM – at prices set by Homm and co-defendant Colin Heatherington, 45, of Port Alberni, Canada, and his brother, Craig Heatherington, 42, of Queensland, Australia. Ficeto and his co-conspirators accounted for more than 90 percent of the companies’ trading volume in many of the companies.
Ficeto, Homm, and other co-conspirators fraudulently manipulated the penny stocks to inflate their prices, exaggerating the purported profitability of the Absolute Funds. As a result, the co-conspirators were able to sell their own shares of the penny stocks at the inflated prices to the hedge funds.
For example, over the span of four minutes near the end of the trading day on May 15, 2007, Ficeto, Homm and Colin Heatherington, through manipulative cross-trades at HWM, caused the price of a penny stock company’s shares to increase from $3.25 to $12. Ficeto admitted at trial to making more than $27 million through HWM from 2005 and 2008. HWM ceased operations in 2009.
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