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Pleading guilty in federal court in Newark to securities and tax fraud conspiracy, 40-year-old Shaun Greenwald said that he, Joseph Taub, 38, and others coordinated trading in dozens of brokerage accounts that they secretly controlled from 2014 through 2016 to manipulate securities prices.
Straw accounts were created in their names, the names of their family members, and the names of entities they controlled, Greenwald admitted.
Most of those involved in the scheme "neither controlled the accounts nor traded the securities held in the accounts," U.S. Attorney Craig Carpenito said.
"Taub funded many of these accounts and used the account holders to conceal the scheme from regulators and law enforcement," he added.
The scheme involved two types of accounts, Carpenito said.
First was a "winner" that bought a large block of shares in a particular security, he said.
Then there was a "loser" account, he said, that placed several orders on the same security "to create upward pressure on the stock price."
Once the prices rose, the conspirators sold the shares in both, the U.S. attorney said.
Sales from the winner account more than made up for the losses from the losers, he said.
Taub was one of Greenwald’s clients, Carpenito said.
"As part of the scheme, Greenwald opened brokerage accounts in his name or entities that he controlled," he said. "However, the vast majority of the funding for these accounts was provided by Taub, which Greenwald concealed on the account opening forms.
"Greenwald then provided the log-in and password information to Taub so that he and others could use the accounts for trades. In return, Greenwald was paid a portion of the profits made from his accounts."
Greenwald also admitted cooking the books for the conspiracy, including calculating the taxes on profits made from the straw accounts, the U.S. attorney said.
Taub gave the account holders funds for the taxes on his portion of the straw account profits but "failed to declare any of this income on his tax returns," he said.
Greenwald, who was expcted to testify against Taub, was given a June 5 sentencing date.
Taub, meanwhile, remained free pending a hearing, with his Edgewater Avenue home securing a $1 million bond.
Carpenito credited special agents of the FBI, IRS – Criminal Investigation and his office with the investigation, while thanking the SEC’s New York Regional Office for its assistance.
Handling the case for the government are Assistant U.S. Attorneys Daniel Shapiro and Zach Intrater of Carpenito's Economic Crimes Unit in Newark and Assistant U.S. Attorneys Sarah Devlin and Acting Chief Barbara Ward of his Asset Forfeiture and Money Laundering Unit.
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