On July 17, 2014, the Department of Justice and SEC charged Matthew A. Bell and various other indivdiuals with running an elaborate pump-and-dump scheme involving shares of a medical education company in Pennsylvania and two other microcap stocks. Matthew A. Bell was arrested by the FBI and currently awaits trial.
The FBI and SEC alleged that the stock market manipulation ring included two self-described bankers, a pair of dishonest brokers, and a corrupt company executive who issued misleading press releases. The SEC today suspended trading in one of the microcap companies before they could illegally profit further.
According to the SEC, Abraxas “A.J.” Discala and Marc E. Wexler – teamed up with brokers Matthew A. Bell and Craig L. Josephberg as well as Ira Shapiro, CEO of the medical education company CodeSmart, to inflate the price of the company’s stock and profit at the expense of the brokers’ customers. They acquired 3 million restricted shares of CodeSmart stock following its reverse merger into a public shell company in May 2013, and improperly flooded the market with the shares as though they were unrestricted. They then engaged in a promotional campaign to hype the stock with Shapiro issuing materially misleading CodeSmart press releases that were sometimes edited by Discala. Meanwhile Bell and Josephberg invested their brokerage clients in CodeSmart, often using their retirement funds to purchase the purportedly unrestricted shares. Once Discala and Wexler reduced their trading and Bell and Josephberg dumped their own shares on the market, CodeSmart’s stock price crashed to earth from a peak of nearly $7 per share. It is currently trading below 10 cents.
Discala and Wexler reaped millions of dollars in illicit gains from the CodeSmart scheme, and Bell and Josephberg each made in excess of $500,000. More recently, they engaged in manipulative trading of two other penny stock companies: Cubed Inc. and The Staffing Group Ltd. They exchanged text messages in which they openly discussed coordinating their trading in these securities in order to create a false impression of market activity. Their text messages also contemplated that Cubed had the potential to be an even more profitable scheme than CodeSmart. Cubed’s stock began trading in earnest on April 22, 2014, at a price of $5.25 and has moved incrementally upward with low volume in a pattern that suggests controlled manipulative trading. The SEC has suspended trading in Cubed stock before Discala and the others could dump their shares on the market.
Kons Law Firm, LLC is currently representing over 20 investors in FINRA arbitration against San Antonio, TX based financial advisor Matthew A. Bell and his brokerage firms regarding the investment losses that various investors suffered in certain penny stocks, including Location Based Technologies (LBAS), Codesmart Holdings (ITEN), Towerstream Corporation (TWER), and Evergreen Solar (ESLQR), as well as various private placement investments such as California Proton Treatment Center, Maryland Proton Treatment Center, and Surebooks.
The Firm’s case representation of investors in these cases was recently profiled in the San Antonio Express News.
Penny stocks and private placements are considered to be risky (and in some cases speculative) investments which may not be suitable for all investors. Stockbrokers like Matthew Bell have a regulatory duty to ensure that any recommendation to purchase penny stocks is suitable for the needs of each customer. Both stockbrokers and their brokerage firms may be held liable for investment recommendations that are unsuitable for clients.
If you have suffered losses in penny stocks with Matthew A. Bell, please contact Kons Law Firm at (312) 757-2272 for a FREE, NO OBLIGATION consultation to discuss your legal rights.
Kons Law Firm represents investors nationwide in securities arbitration and litigation matters. To learn more about the Firm’s securities litigation and FINRA arbitration practice, please visit www.investmentlossattorney.com.