Canadian Sentenced for Pump & Dump Security Fraud

Supported By:

Net Patrol International Inc.  Data Investigation and Forensic Services
Bankruptcy and Insolvency Trustees

U.S. court sent a Canadian trader to prison for 3,5 years and ordered him and his co-conspirator to pay more than US$215 million in restitution for defrauding investors by artificially inflating penny stocks and then selling them at a high prize.

Penny stocks are common shares of small public companies that trade for less than one dollar per share.

Securities trader Colin Heatherington, 49, of Vancouver, Canada, manipulated penny stock prices through multiple hedge funds. He inflated them through false and misleading positive statements, before ultimately selling off his shares for millions in profits.

This type of fraud is called ‘pump and dump’ and once the fraudster sells, or dumps, his overvalued shares, the price falls and investors loose their money.

From 2004 to 2008, Heatherington oversaw the purchase of billions of shares of U.S.-based penny stocks out of Absolute Funds, a Cayman Island-based company that managed eight hedge funds in Spain.

As the trader who commissioned these deals, he raked in millions in management and performance fees, prosecutors said, before even taking into consideration what he earned upon dumping his stakes in the inflated junk stocks.

Absolute Funds’ founder and chief investment officer, Florian Wilhelm Jürgen Homm, 64, was indicted in 2013 on similar stock fraud charges but has been a fugitive ever since. At the time of his indictment, his fund had allegedly defrauded investors of more than $215 million.

Following the search for Homm’s whereabouts, U.S. authorities sought Heatherington’s extradition from Canada; he agreed to go to the U.S. to stand trial in 2021, before ultimately pleading guilty on Feb. 1, 2024.

His co-defendant, former Beverly Hills stockbroker Todd Michael Ficeto, 57, was previously sentenced to serve six years in federal prison following a 2019 guilty verdict to 18 felonies relating to his managerial role in the penny stock pump and dump scheme.

Like Heatherington, he personally accumulated millions in fees, commissions, and self-dealing trades at his clients’ expense; money which he spent on luxury cars, expensive homes and a yacht, prosecutors said.

This article was originally sourced from www.occrp.org