Mihalek Law A Securities Arbitration & Litigation Firm
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Misplaced trust

Pump and dump. It might sound at first like the name of a convenience store chain, but it is actually a type of securities fraud.

One such scheme that might affect some of our Lexington readers has alleged participants scattered across the nation. The seven were indicted last year, accused of pumping up the prices of penny stocks and then dumping their shares. Investigators say the $300 million pump and dump fraud left investors holding worthless shares in four publicly traded companies.

One of the people indicted recently reached a plea agreement in which he has pleaded guilty to conspiracy to commit securities fraud (a crime for which he can be sentenced to up to 5 years) and conspiracy to commit mail and wire fraud (a possible 20 years in federal prison). The plea signals to observers that the 48-year-old Texas man is cooperating with prosecutors in exchange for a reduced sentence.

The four companies involved in the alleged fraud are The Staffing Group Ltd., Cubed Inc., CodeSmart Holdings Inc. and StarStream Entertainment Inc.

One of the defendants in the case is the CEO of CodeSmart; a company in which trading has been suspended by the Securities and Exchange Commission.

The man who recently agreed to the guilty plea allegedly found many investors in a large church he attends in San Antonio, according to a news report. The trust the parishioners placed in him was clearly misplaced.

Those here in Kentucky who have had their trust in a broker or financial adviser shattered by misdeeds, manipulation, churning, improper recommendations or advice or unauthorized trading know that the pain of being hurt by broker misconduct can be more than financial damage. The pain can be damaging to family and your security.

An attorney experienced in representing victims of securities fraud can help you explore your options and begin the recovery process.

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