U.S. prosecutors lifted the veil on a $50 million international stock-manipulation scam that got shut down after the alleged culprits suggested to an undercover FBI agent that they buy a Picasso to launder illicit profits.
It’s the “only market that is unregulated,” one of the alleged wrongdoers boasted in a conversation that was secretly recorded, U.S. prosecutors said as they handed down an indictment in Brooklyn, New York, against six people on Friday.
The ill-fated art deal was just one part of an alleged scam that sprawled from the gilded Mayfair neighborhood in London to the island nation of Mauritius in the Indian Ocean. The alleged perpetrators range from a U.K. stockbroker with hundreds of millions of dollars under management to a bank in Budapest and the prosecution shows penny stocks continue to attract scrutiny from regulators across the globe.
Among those charged with securities fraud or money-laundering conspiracies are employees of Beaufort Securities Ltd., the chief executive of Loyal Bank in St. Vincent and a London art dealer. Four companies including Loyal Bank were also indicted.
The U.K. Financial Conduct Authority placed Beaufort Securities and Beaufort Asset Clearing Services into administration, a form of bankruptcy. Both firms are owned by Beaufort International Associates Plc, which is based near the iconic “Gherkin” building in the heart of London and where the chief executive and biggest single shareholder is Tanvier Malik, according to company filings. He wasn’t charged. The parent company isn’t in administration.
“I’m just as flabbergasted as everyone else,” said Nick Piazza, chief executive of Kiev-based SP Advisors, which bought a stake in Beaufort in 2014. “We were just kind of a passive shareholder but we were hoping they’d do well and we’d get our investment back. Unfortunately, something has gone haywire.”
Arvinsingh Canaye, of Mauritius, a Beaufort manager, was arrested Thursday. He pleaded not guilty in federal court in Brooklyn. A bail hearing is scheduled for March 6. Beaufort officials didn’t immediately respond to requests for comment.
Pump-and-Dump
During the alleged fraud, which ran from March 2014 to February 2018, the defendants all conspired to conceal the ownership and control of publicly traded companies in the U.S. and manipulated the price and trading volume of the stocks, in what were essentially "pump-and-dump" scams, prosecutors said.
The scam came to light as U.S. investigators were probing brokerages in Belize that were suspected of market manipulation. A wiretap revealed a broker managing some of those trades was using Beaufort Securities, according to the indictment. The broker was later caught saying he was winding down his firm and transferring some of his clients to Beaufort, the U.S. said.