$50 Million Lost to Fraudsters Posing as Broker-Dealers
A Large-Scale Internet-Based Fraud Scheme Made 70 Victims.
A man from California confessed his involvement in a large-scale and long-running Internet-based fraud scam that enabled him and other fraudsters to steal about $50 million from dozens of investors over an eight-year period, from 2012 to October 2020.
From in or around 2012 through on or about October 27, 2020, in Morris County, in the District of New Jersey, and elsewhere, the defendant, ALLEN GILTMAN did knowingly and intentionally conspire and agree with others to, by use of the means and instrumentalities of interstate commerce, the mails, and facilities of national securities exchanges, directly and indirectly, knowingly and willfully use manipulative and deceptive devices and contrivances in contravention of Title 17, Code of Federal Regulations, Section 240. l0b-5 in connection with the purchases and sales of securities, to wit, Certificates of Deposit offered through various fictitious entities, by
(a) employing devices, schemes and artifices to defraud;
(b) making untrue statements of material fact and omitting to state material facts necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading;
(c) engaging in acts, practices and courses of business which operated and would operate as a fraud and deceit upon persons, namely, persons with interests in the fictitious Certificates of Deposit, contrary to Title 15, United States Code, Sections 78j(b) and 78ff, and Title 17, Code of Federal Regulations, Section 240. l0b-5.
Allen Giltman, 56, and his co-conspirators used the internet to solicit money from investors by creating bogus websites touting different investment possibilities (mainly the acquisition of certificates of deposit).
The Fraudulent Websites advertised higher than average rates of return on the CDs, which enhanced the attractiveness of the investment opportunities to potential victims.
At times, the fraudulent websites were designed to closely resemble websites being operated by actual, well-known, and publicly reputable financial institutions; at other times, the fraudulent websites were designed to resemble legitimate-seeming financial institutions that did not exist.
They promoted the fraudulent investment sites via ads on Google and Microsoft Bing search results for searches, including phrases such as “best CD rates” or “highest cd rates.”
The journalists at BleepingComputer reported that the scammers pretended to be FINRA broker-dealers while posing as employees of the financial firms they impersonated on the scam sites.
During their fraud schemes, they used a variety of methods to conceal their true identities, such as virtual private networks (VPNs), prepaid gift cards to register web domains, prepaid phones, and encrypted apps to communicate with their targets, and fake invoices to explain large wire transfers they received from their victims.
After discovering one of the fraudulent websites, victims would contact an individual – identified in the information as Giltman – by telephone or email as directed on the sites. During his communications with victims, Giltman impersonated real FINRA broker-dealers by using their names and FINRA Central Registration Depository numbers. He would then provide the victims with applications and wiring instructions for the purchase of a CD. The funds wired by the victims would then be moved to various domestic and international bank accounts, including accounts in Russia, the Republic of Georgia, Hong Kong, and Turkey. None of the victims received a CD after wiring the funds.
To date, law enforcement has identified at least 150 fraudulent websites created as part of the scheme. At least 70 victims of the fraud scheme nationwide, including in New Jersey, collectively transmitted approximately $50 million that they believed to be investments.
The wire fraud conspiracy charge Giltman confessed has a possible prison sentence of 20 years, while the securities fraud charge carries a maximum prison sentence of five years.
Both carry fines of $250,000 or double the gross amount of gain or loss from the violation, whichever is greater.
Giltman will receive his sentence on May 10, 2022.