Israelis Used BVI In Multi-Million ‘Pump and Dump’ Fraud Scheme
ROAD TOWN, Tortola, BVI – Two Israelis indicted in the U.S. and facing extradition for allegedly using fake passports and identities and running a “pump and dump” securities fraud scheme that made millions were ordered kept in custody for twenty days by the Jerusalem Magistrate’s Court today, due to fear that they both pose a flight risk.
The defendants, 31-year-old Gery Shalon and 40-year-old Ziv Orenstein, were indicted by a grand jury in New York in June, on charges of conspiracy to commit securities fraud, conspiracy to commit wire fraud, securities fraud, wire fraud, conspiracy to commit fraud using false documents, aggravated identity theft, money laundering conspiracy.
A month later, U.S. authorities submitted an extradition request to their Israeli counterparts, in order to place the two on trial stateside. On Monday both were arrested by Israel Police, who were working closely with FBI investigators who had traveled to Israel as part of the case.
According to the indictment issued in the United States District Court in the Southern District of New York, Shalon, described as the ringleader, was throughout the duration of the scam a resident of Israel. The indictment says that he orchestrated “multi-million dollar stock manipulation – or pump and dump – schemes to manipulate the price and volume of traded shares in numerous publicly traded stocks by means of deceptive and misleading email campaigns, and manipulative prearranged stock trading.”
In addition to Shalon and Orenstein, a third main suspect, American Joshua Samuel Aaron, played a major role in the scam but has yet to be arrested. U.S. authorities believe Aaron worked as the scam’s front man in the U.S., making connections with associates under the direction of Shalon. Aaron is not a citizen of Israel, though he resided in the country at different times since the scam began in 2011.
The suspects would allegedly find companies to to target for manipulation, and would buy up large amounts of stock using shell companies and brokers accounts they set up with fake identities. They would also send out millions of spam emails from the two straw companies – “Entersea Limited” and “Jemsta Enterprises” (based in England and the British Virgin Islands, respectively) touting the stocks, which along with their bulk purchases would help drive up the stock prices.
Aaron also set up another shell company called Warmkal Trading Limited which was allegedly used to launder profits. According to the indictment the defendants used a series of fake identities, with Shalon using names including “Phillipe Mousset” and “Christopher Engeham”, while Orenstein was known to use the names “Aviv Stein” and “John Avery”, while Aaron went by the alias “Mike Shields.”
In court today, the prosecution said that the crimes the defendants are suspected of are of the utmost severity and they are expected to receive very serious prison terms in the U.S., which along with their history of using fake aliases and forged passports, indicate that they pose a serious flight risk. The presiding judge agreed, and both defendants were ordered kept in custody for 20 days.
The Israel Police said Tuesday night that the FBI contacted them as part of their investigation and asked for assistance in probing the case, due to the involvement of Israelis.
Following a collaborative investigation the two Israelis were arrested, and at the moment an extradition request filed by the FBI is pending. Israel Police said Tuesday night that more than 10 U.S. law enforcement officers have been in Israel over the past few days working out of the cybercrimes unit headquarters in Lod.
The arrests were first reported by Bloomberg on Tuesday night, when the case was still under a gag order in Israel. The Bloomberg report said the arrests were part of a months-long investigation of a group of friends who met in college in Florida and are tied to the J.P. Morgan hack in 2014, with suspects in Israel accused of security fraud for inflating the value of low-volume stocks.
The hack, which began last June and lasted through August, infiltrated the bank’s systems and sent information including customer account data back to the hackers. The breach exposed information on 76 million households and 7 million businesses, making it one of the largest data breaches in history.
The company said no financial information or account data had been compromised, and that it had not seen an increase in fraud. The bank suspected the hack may have originated in Russia, but was unclear as to whether it was the work of a state-sponsored actor or a private actor looking for financial gain.
Just two months before the hack commenced, J.P. Morgan CEO Jamie Dimon announced that the company would devote a quarter of a billion dollars to cybersecurity that year. After the breach was disclosed, he said the company would double cyber-security spending over five years.
Ironically, that could be a boon for Israel, which has produced a slew of cutting edge cyber security companies. Last year, Prime Minister Benjamin Netanyahu noted that Israel makes $7 billion in the roughly $80 billion global cybersecurty market. That market, according to cyber security ventures, is expected to double by 2019.