A former Vancouver man was sentenced Friday in U.S. District Court in Tacoma to more than four years in prison for running a stock fraud scheme, according to a news release from U.S. Attorney Annette L. Hayes.
Tovy Pustovit, 21, of Gladstone, Ore., initiated the pump-and-dump stock scheme, Hayes said, even after narrowly avoiding prosecution in an earlier scheme.
He pleaded guilty in May to manipulating the share prices of several penny stocks, and was the fifth and final defendant to be sentenced, the news release said.
In addition to receiving a 51-month prison sentence, Pustovit agreed to forfeit $266,373 in criminal proceeds.
“The people damaged by these ‘pump-and-dump’ schemes not only lose money, they lose trust in our financial markets,” Hayes said in the news release. “This defendant was warned that what he was doing was wrong and yet he kept right on cheating and defrauding investors. He will now pay the price for that decision.”
According to the facts laid out in the plea agreement, in 2012, Pustovit, with Alexander Hawatmeh, Mikhail Galas and Christopher Mrowca, manipulated the stock of ISM International. Pustovit was not initially charged in that scheme. However, after the others were arrested, investigators learned additional information about Pustovit’s participation and how he continued to manipulate penny stocks, the news release said.
The U.S. Securities and Exchange Commission sued Pustovit and the three co-defendants in August 2014, prompting U.S. District Judge Ronald B. Leighton to order that they stop engaging in stock fraud.
However, in November 2014, Pustovit and Marius Morariu, 21, of Beaverton, Ore., hatched another scheme involving three companies in the over-the-counter market: Brightech, General Environment Management and Green Street Capital Corp.
Morariu lined up and funded various unrelated accounts and took cash from Pustovit to purchase the penny stocks. Once a substantial amount of stock was purchased, the two sent out email blasts from stock promotion websites they controlled urging people to buy the stocks. As the price rose, they dumped their shares, making significant profit, according to the news release.
Pustovit and Morariu further manipulated the stock value of General Environment Management earlier this year, accumulating some 2.7 million shares. They netted $83,096 in that scheme, the news release said, and harmed numerous investors.
Morariu was also sentenced Friday to three years of probation and 10 months of house arrest.
Hawatmeh was previously sentenced to five years in prison; Mrowca received three years in prison; and Galas received credit for time served.
The case was investigated by the FBI and is still under a civil investigation by the Securities and Exchange Commission.