A former Beverly Hills stockbroker who worked with a fugitive hedge fund manager was convicted Friday of 18 federal charges for his role in a stock manipulation scheme designed to pump up the reported profits of hedge funds, resulting in about $200 million in losses to investors.
Todd Ficeto, 52, of Marion, Ohio, was found guilty late Friday afternoon, after a 17-day jury trial, of seven counts of securities fraud, five counts of unlawful money transactions, two counts of investment adviser fraud, and one count each of money laundering conspiracy, obstruction of justice, making false statements, and conspiracy to commit securities fraud and wire fraud, according to the U.S. Attorney’s Office.
U.S. District Judge Virginia A. Phillips scheduled an Oct. 7 sentencing hearing for Ficeto.
Each charge of conspiracy to commit securities fraud and securities fraud carry a statutory maximum penalty of 25 years in federal prison; the money laundering charges each carry a maximum 10-year penalty; and each of the other charges carry a maximum five-year penalty, according to prosecutors.
Ficeto was the president of a Beverly Hills-based broker-dealer, Hunter World Markets, which he co-owned with Florian Wilhelm Jurgen Homm, who was indicted in March 2013 on charges of securities fraud and wire fraud after being arrested that month in Italy, according to the U.S. Attorney’s office.
Homm, who later fled to Germany while awaiting extradition to the U.S. and remains a fugitive, was the founder and chief investment officer of Absolute Capital Management Holdings. The Cayman Islands-based investment adviser firm operated from Palma de Majorca, Spain, and managed eight hedge funds called the Absolute Funds, according to federal prosecutors.
Court documents allege that between September 2004 and September 2007, Homm directed the Absolute Funds to buy billions of shares of thinly traded, United States-based “penny stocks” through Hunter World Markets that Ficeto located and brought to Homm through investment banking deals.
Ficeto “then facilitated the manipulative stock purchases and caused millions of shares of the same penny stocks to be given to Homm, Hunter World Markets and CIC Global Capital,” which was controlled by two co-defendants from British Columbia, Canada, and Queensland, Australia, according to a U.S. Attorney’s Office statement.
Prosecutors allege that Ficeto, Homm and the other co-conspirators “fraudulently manipulated the penny stocks to inflate and artificially prop up their prices to exaggerate the purported profitability of the Absolute Capital hedge funds. As a result, the co-conspirators were able to sell their own shares of the penny stocks at the inflated prices to the hedge funds. The stock price inflation also served to fraudulently overstate the performance of the hedge funds which, in turn, generated substantial performance fees and other compensation for defendant Homm and his co-conspirators. The co-conspirators then used the inflated performance figures to induce investments from unsuspecting victim-investors.”
Ficeto was part of an elaborate conspiracy to launder the illicit proceeds throughout the world, according to court documents, which state that he sent nearly $10 million of illicit proceeds to an account in the Cook Islands days before his testimony before the Securities and Exchange Commission, and then lied to the SEC about the Cook Islands account.
“Ficeto also used a hedge fund called the Hunter Fund, in which the Absolute Funds invested and also was used to conceal investments by the Absolute Funds in the penny stocks and to manipulate the stock market,” according to the U.S. Attorney’s Office.
As the scheme unraveled, Homm abruptly resigned from the firm in the middle of the night on Sept. 18, 2007, according to court documents.