Undercover FBI agent helps SEC bust fraudulent securities scheme
The United States Securities and Exchange Commission (SEC) today launched a securities fraud enforcement action against Charlie Abujudeh.
The complaint, filed at the New York Eastern District Court and seen by FX News Group, alleges that Abujudeh engaged in fraudulent schemes to sell publicly traded stock to retail investors. From not later than August 2019 through at least September 2020, Abujudeh, acting in concert with others, schemed to fraudulently sell the stock of microcap companies Odyssey Group International, Inc, Scepter Holdings, Inc, and CannaPharmaRx, Inc. to investors in the public United States securities markets.
The linchpin of Abujudeh’s schemes was his control of nearly all of the stock that was deposited with brokerage firms and available for public trading for each of these securities. This control enabled him to manipulate the market for these securities using a variety of deceptive tactics, most often through deceptive promotional campaigns that he funded and controlled.
With respect to Odyssey, by August 2019, Abujudeh had amassed 2.5 million shares which constituted about 98% of the Odyssey float. Abujudeh and those with whom he was acting in concert then hired stock promoters to tout Odyssey to potential investors over the phone using high-pressure sales tactics. Abujudeh referred to these stock promoters as his “phone room,” which began soliciting investors in or around January 2020.
Using deceptive tactics, the phone room touting Odyssey on Abujudeh’s behalf convinced unwitting investors to purchase thousands of shares of Odyssey stock. The volume of trading, however, failed to meet Abujudeh’s expectations. So Abujudeh and his associates fired the phone room and agreed to hire an individual whom they believed ran a different phone room that was capable of convincing investors to purchase hundreds of thousands of shares per week.
Abujudeh was unaware, however, that the individual he and his associates were attempting to hire was, in fact, a cooperating witness (CW) who was working undercover on behalf of the Federal Bureau of Investigation (FBI). The CW recorded numerous phone calls and captured numerous encrypted text communications with Abujudeh and two of his associates, including an associate identified herein as “Person 2.”
In connection with his fraudulent scheme, Abujudeh orchestrated with the CW two transactions in which Abujudeh believed he was selling stock to investors who had been recruited by the CW. Abujudeh and the CW coordinated the timing, offering price, and bidding price for these market transactions, which resulted in Abujudeh unwittingly selling 7,000 Odyssey shares to the FBI for approximately $15,840. Abujudeh wired the CW’s commission of $5,492 for these stock sales to a bank account controlled by the FBI.
Ultimately, Abujudeh was unable to hire the CW because neither the CW nor the FBI was actually running a phone room to promote penny stocks. So Abujudeh instead funded and controlled an email and web-based promotional campaign touting Odyssey stock to investors.
Abujudeh’s email and web campaign, like his phone room, was part of his deceptive scheme to sell his Odyssey shares. Among other things, Abujudeh caused the stock promoters he hired to conceal that he controlled virtually all of the Odyssey float; funded the promotional campaign; intended to sell his Odyssey stock into the demand his digital promotions generated; and coordinated the promotional campaign with others, including one or more Odyssey shareholders and/or affiliates with whom he was sharing the proceeds from his stock sales.
Abujudeh’s deceptive promotional campaign was successful. In all, Abujudeh generated approximately $2.6 million in illicit proceeds by selling Odyssey stock to investors during the promotions he funded. As Abujudeh closed in on liquidating all 2.5 million of his Odyssey shares and had concluded his promotional campaign in or around July 2020, he began paying an Odyssey insider with whom he had been coordinating a total of $350,000.
Abujudeh’s scheme operated in a similar manner with respect to at least two other companies, Scepter and CannaPharmaRx. He funded and controlled email and web-based promotional campaigns touting these securities without disclosing that he controlled the vast majority of the float for each of them and that he was simultaneously selling his shares into the increased demand that his campaigns had generated.
In all, Abujudeh generated approximately $3.2 million in illicit proceeds by selling his Scepter stock, and another $3.3 million in illicit proceeds by selling his CannaPharmaRx stock, during his respective campaigns promoting these companies.
At the time that Abujudeh sold his Odyssey, Scepter, and CannaPharmaRx stock, there was not a registration statement for those sales on file with the Commission or in effect as to those transactions, as required by the relevant securities laws. No exception from the registration requirement applied.
In this action, the Commission seeks emergency preliminary relief, including a temporary restraining order against further violations of the federal securities laws and an emergency asset freeze to preserve the assets necessary to satisfy an eventual judgment against the defendant, including disgorgement of ill-gotten gains. The Commission also requests an immediate accounting, a repatriation order, and an evidence preservation order to facilitate the prompt resolution of this matter on the merits.
The SEC further seeks a permanent injunction against the defendant, enjoining him from engaging in transactions, acts, practices, and courses of business of the type alleged in the Complaint, disgorgement of all ill-gotten gains from the unlawful conduct set forth in this Complaint, together with prejudgment interest; civil penalties; an order barring the defendant from participating in any offering of a penny stock; an order prohibiting the defendant from acting as an officer or director of any issuer that has a class of securities registered pursuant to Section 12 of the Exchange Act [15 U.S.C. § 781], or that is required to file reports pursuant to Section 15(d) of the Exchange Act [15 U.SC. § 78o(d)]; and such other relief as the Court may deem appropriate.