Settlement Reached in Stock Fraud
Three California college students agreed to pay a total of $229,000 to settle regulatory charges they used the Internet to manipulate the stock of a commercial printing company, U.S. regulators said Tuesday.
The case was the first Internet stock fraud case filed by the Securities and Exchange Commission against people unaffiliated with the company whose stock they allegedly manipulated, SEC officials have said.
One of the students, Hootan Melamed, 24, a pharmacy graduate student at Western University of Health Sciences in Pomona, also was sentenced to 10 months in prison, the SEC said. He had pleaded guilty to conspiracy to commit securities fraud.
A fourth person, Arash Aziz-Golshani, alleged to be the group leader, was sentenced to 15 months in prison after pleading guilty to securities fraud and conspiracy to commit securities fraud, the SEC said.
The SEC, in civil cases filed in December 1999, alleged the four manipulated NEI Webworld Inc.’s stock by posting false messages on 500 Internet bulletin boards. These messages said the Dallas-based company would be taken over by LGC Wireless, a closely held telecommunications company. NEI isn’t accused of wrongdoing.
“This case shows that young people without traditional resources can use the Internet to influence the market for public securities,” SEC assistant enforcement director Erich Schwartz said.
Aziz-Golshani and Melamed, after buying large blocks of NEI stock, used computers at the UCLA biomedical library to send the messages, using 50 aliases, the SEC said.
Aziz-Golshani, 24, a recent UCLA graduate, still faces SEC civil fraud charges in which the agency is seeking $473,000, the commission said.
“He regrets the incident that led to these events and wishes to put this behind him,” said Aziz-Golshani’s lawyer, Michael Missal of Washington.
He now sells leather coats in a family business, Missal said.
The SEC expects to reach a settlement with Aziz-Golshani “as soon as we’re satisfied as to the location of all his assets,” Schwartz said. Aziz-Golshani manipulated 11 other stocks in addition to NEI from April to October 1999, the SEC has alleged.
Also settling SEC charges were Allen Derzakharian, 27, a UCLA graduate who also was a Western University pharmacy graduate student, and Arash Molayem, 20, a UCLA junior.
Lawyers for Melamed, Derzakharian and Molayem didn’t respond to requests for comment.
In settlements with the SEC, Melamed and Derzakharian agreed to surrender a total of $211,250 from a joint account, the SEC said. Melamed also agreed to turn over an additional $2,000 of his own. Molayem agreed to surrender $16,000.
As part of their SEC settlements, the three neither admitted nor denied wrongdoing.
