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Pump-And-Dump Scheme Participants Must Pay $9M

Published Aug 01, 2018

A New York federal judge on Monday ordered four participants in a pump-and-dump scheme that targeted retail investors to pay a combined $9.1 million in disgorgement and civil penalties.

U.S. District Court Judge Denise Cote’s order pertains to Angelique de Maison, the wife of the mastermind behind the scheme, as well as Trish Malone, a former executive who worked at a number of companies involved in the scheme, and Louis Mastromatteo and his company Traverse International, which participated as well.

The U.S. Securities and Exchange Commission alleged in 2014 that Zirk de Maison, who was named Izak Zirk Engelbrecht before taking the surname of his wife Angelique de Maison, directed a complex scheme to illegally take control of tens of millions of shares of companies including Kensington Leasing and Gepco Ltd. Behind the scenes, Zirk de Maison and his wife, who served as Gepco's chairwoman, manipulated share prices so that his associates could sell at inflated amounts, the SEC claimed.

Angelique de Maison promoted two of the companies that were involved to investors, generating about $4.2 million, according to the Monday order. The court ordered her to disgorge the money, plus prejudgment interest, and pay $4.2 million in civil penalties.

Her counsel, Jeffrey B. Coopersmith of Davis Wright Tremaine LLP, said they are evaluating their options, and called the civil penalties “disproportionate to the conduct at issue.”

“We believe that disgorgement, if it is still a proper remedy for the SEC at all after the [U.S.] Supreme Court’s 2017 decision in Kokesh v. United States , is reserved for defendants who actually obtained ‘ill-gotten gains,’ which we believe the evidence clearly showed was not the case for Angelique de Maison,” he told Law360 by email.

Malone worked as chief financial officer for four of the companies, where she assisted with the stock offerings, the order said. The court ordered her to disgorge her salary from her time participating in the scheme plus prejudgment interest, according to the filing. The disgorgement totaled about $395,000, and she was ordered to pay a $125,000 civil penalty.

Mastromatteo and his company Traverse were ordered to disgorge almost $59,000, plus prejudgment interest, and pay the same $59,000 in civil penalties for participating in the scheme to illegally buy and sell 2.5 million shares of Gepco.

In January 2017, Zirk de Maison and seven others were sentenced to prison for their roles in the scheme, which cost investors $39 million, the government said at the time. Zirk de Maison was sentenced to more than 12 years and $39 million in restitution.

Malone, who is representing herself, declined to comment.

Representatives with the SEC didn’t respond Monday to a request for comment.

The SEC is represented by Howard A. Fischer and John O. Enright in-house.

Angelique De Maison is represented by Jeffrey B. Coopersmith and Lauren Rainwater of Davis Wright Tremaine LLP.

Counsel information for Mastromatteo and Traverse International was not available Monday.

The case is Securities and Exchange Commission v. Jason Cope et al., case number 1:14-cv-07575 in the U.S. District Court for the Southern District of New York.