How The Govt Says Elgindy's Scheme Worked By Michael Rapoport NEW YORK (Dow Jones)--It was an audacious scheme, in prosecutors' telling: Use moles within the Federal Bureau of Investigation to get secret government information that could be damaging to a company, and then use that information to profit by short-selling the company's stock or by extorting the company outright. That's what the government alleges Anthony Elgindy did, in an indictment released Wednesday. And while prosecutors are holding back on some of the details, the indictment does lay out a series of facts that can be pieced together into one detailed example of how the alleged scheme worked. The information involves Nuclear Solutions Inc. (NSOL), a radioactive-waste treatment company which the government says Elgindy shorted last December - borrowing the company's shares and selling them in the hopes that the stock price would go down so that Elgindy could repurchase the shares at a lower price to return them to their owner, thereby making him a profit. From the government's indictment, here's a chronology of what prosecutors say Elgindy did on Nuclear Solutions, matched with what was going on with the stock at the time: Dec. 19: Jeffrey A. Royer, an FBI agent working with Elgindy and who was indicted along with him, searches the FBI's National Crime Information Center database and finds "criminal history information" about Paul Maurice Brown, the founder of Nuclear Solutions. (The government doesn't detail the nature of the information Royer found regarding Brown, who died in April. A Nuclear Solutions spokesman couldn't be reached for comment; Elgindy's attorneys also have not been available.) Same day, about two hours later: Elgindy sends an e-mail to subscribers who follow his stock picks. The e-mail states: "NSOL - CEO, Dr. Paul Maurice Brown, is a convicted felon..." That day, Nuclear Solutions stock tumbles from $3.20 a share to $2.45, on heavier-than-usual volume - a drop of about 23%. Dec. 20: Elgindy and others begin posting information about Brown's alleged criminal record on Internet bulletin board and in chat rooms. In the indictment, the government alleges that Elgindy and his associates "sought to accomplish their manipulation by coordinating the release of negative information with short-selling in a manner designed to exaggerate the negative market sentiment for the stock." Dec. 22 and 26: More negative e-mails from Elgindy about Nuclear Solutions. In one, he says that "Convicted Felon Brown ... has history of lying & fraud..." In aother, he says, "NSOL - info on (a Nuclear Solutions executive) the scumbag (attorney) ... has been disbarred..." Dec. 24 on: Elgindy or his associates short Nuclear Solutions stock on seven separate occasions, lasting through most of January. Dec. 27: Elgindy sends another e-mail to subscribers asking for details about their positions if they're short. Another e-mail, on Jan. 3, says "NSOL - short 20% @ 2.05 (add)." The "2.05" corresponds approximately to Nuclear Solutions' stock price at the time - a price which dwindles lower throughout most of January. Jan. 30: In a chat-room discussion with his subscribers, Elgindy says that "We are pulling out of NSOL" and "NSOL <-- coverage (terminated) for good." Jan. 31 and Feb. 1: Trading volume once again surges on Nuclear Solutions - consistent with the idea that any investors who had shorted the stock on the basis of Elgindy's e-mails were now repurchasing the stock to cover their positions. The price is volatile, plunging as low as $1 and going as high as $1.80. The stock closes on Feb. 1 at $1.55. That's less than half the $3.20 a share it traded at before Elgindy's initial e-mail - a difference that represents profit to anyone who shorted the stock.
? : Isn't the NCIC database SUPPOSED to be used to identify criminals and former felons ? It would seem to me that any employer should have the ability to tap into such a database to ferret out any employees with criminal records ... I think what it was was that the FBI was completely embarrassed that one of their own was giving up info ... As mentioned before ... MER F*cks america for billions and gets a slap on the wrist, a small guy goes to jail. Just like that kid who got caught ... Ain't America grand ...
if im not mistaken, hes been in jail before... i cant remember exactly what he did but i remember all the noise from the incident over on siliconinvestor... -qwik
How can he short an illiquid stock like that under $5? To my knowledge no broker would allow anyone to short stocks trading under $5. Even if it was shortable at the time, how many shares could he get off? The stock only traded a few thousand shares a day. Something is not right in this story.
OK ... let me see if I have this straight ... Item A ) Blodgett & MER get BILLIONS of dollars for manipulating the price of stocks by extorting fees from companies for NOT downgrading their stocks on their website and in analyst recommendations. Item B) Elgindy & his company make thousands of dollars for manipultaing the price of stocks by extorting fees from companies NOT to mention their stocks on his small website. Item B gets 5 felony indictments, item A (& company) gets slapped on the wrist ... Elgindy may be scum too, but I think overall it's a sad time to be an american ...