Three Israelis nabbed for massive US stock fraud scheme

US federal agency charges four men — 1 in Florida, 3 in Israel — for defrauding investors of millions; suspects also linked to bank hacks

By Judah Ari Gross 21 July 2015, 11:55 pm

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Judah Ari Gross is The Times of Israel's religions and Diaspora affairs correspondent.

The US Securities and Exchange Commission. (John M/Flickr/CC BY-SA 2.0)

Police in Israel arrested three Israeli citizens allegedly tied to computer hacks of JPMorgan Chase & Co. and other financial institutions after a federal US agency charged them with a massive scheme aimed at pumping up stocks and defrauding investors, officials said Tuesday.

Israel Police spokesman Micky Rosenfeld said three citizens had been arrested Thursday and arraigned in a Rishon Letzion Court, according to Reuters.

He said he did not have more information on the particulars of the case, which was unsealed by the US Securities and Exchange Commission Tuesday.

A fourth man was arrested in Florida in relation to the case, the Bloomberg Business news site reported. And a fifth man is still at large.

The SEC filed its complaint Tuesday in a Manhattan federal court, naming Joshua Samuel Aaron, Gery Shalon and Zvi Orenstein as the perpetrators of a “penny stock” fraud.

The men were charged with manipulating penny stocks to pump prices “as high as 1,800 percent before dumping the shares for at least $2.8 million in illicit proceeds,” the SEC said in a statement.

The Israeli men used pseudonyms, numerous corporate identities and created at least 20 different website “to con investors into buying the stocks and causing the spikes in trading volume and share price that spurred their schemes,” the SEC said.

“Aaron and Shalon allegedly wrote and designed the e-mails, Shalon allegedly disseminated them, and Orenstein allegedly provided essential operational support by handling brokerage accounts using numerous aliases,” the SEC said.

“These men allegedly manipulated the microcap market to make quick profits at the expense of unsuspecting investors, and they have been caught by law enforcement despite using aliases and other ploys in an attempt to cover their tracks,” said Andrew M. Calamari, Director of the SEC’s New York Regional Office.

The men were also linked to the hacking of several financial institutions computer systems last year, as a result of which the information of some 83 million customers was exposed. The hack, which targeted JP Morgan as well as other firms, was one of the largest data breaches in history.