July 28, 2020
By: Staff Report, DOJ PR
NEWARK, N.J. – A New Jersey-based securities trader today admitted orchestrating a massive, long-running market manipulation scheme and tax fraud that netted more than $17 million in illegal profits between 2014 and 2016, U.S. Attorney Craig Carpenito announced.
Joseph Taub, 41, of Clifton, New Jersey, pleaded guilty before U.S. District Judge John Michael Vazquez in Newark federal court to counts four and five of a superseding indictment charging him with securities fraud and conspiracy to defraud the United States.
According to documents filed in this case and statements made in court:
From 2014 to 2016, Taub and others conspired to manipulate the securities prices of numerous public companies by coordinating trading in dozens of brokerage accounts he secretly controlled. Taub used “straw accounts” that were held in the names of others to conduct much of his trading. Taub funded many of these straw accounts and used the straw account holders to conceal the scheme from regulators and law enforcement.
To manipulate securities prices, Taub engaged repeatedly in a series of contemporaneous transactions designed to artificially influence the market price of the securities of various publicly traded companies, and induce other market participants to trade in those securities based on the false impression that there was real market interest in the securities, using Run Based Manipulation and Order Based Manipulation.
Run Based Manipulation is a type of securities manipulation in which a manipulator takes either a long or a short position in a security, enters orders or trades in a manner designed to inflate or deflate the price of the security while attracting others to trade the security and finally reverse their position at the inflated or deflated price. A common feature of Run Based Manipulation is that the manipulator profits directly from the manipulated market by exploiting investors who bought at inflated prices or sold at depressed prices. Order Based Manipulation is a type of securities manipulation involving orders, sometimes but not always accompanied by trades, that are intended to give other market participants a false signal about the security’s demand or supply.
Taub also admitted defrauding the United States by hiding from the brokerage firms and the IRS the identities of those who actually controlled the straw accounts and who reaped the majority of the profits from the scheme. As a result, the profits from the straw accounts were taxed at the lower tax rates applicable to the straw account holders instead of the higher tax rates applicable to Taub, which allowed Taub to avoid $394,424 in taxes.
The securities fraud count carries a maximum potential penalty of 20 years in prison and a $5 million fine. The conspiracy to defraud the United States count carries a maximum potential penalty of five years in prison and a $250,000 fine, or twice the gross gain or loss from the offense. Under the terms of the plea agreement, if accepted by the court, Taub will receive a sentence of 18 months in prison, will forfeit $17.1 million, and will be ordered to pay restitution in the amount of $394,424 to the IRS. Sentencing is scheduled for Dec. 1, 2020.
Sean Greenwald pleaded guilty to his role in the scheme on Feb. 21, 2018 and awaits sentencing.
The Department of Justice has also reached a settlement of its civil forfeiture case against assets acquired by Taub and his family using proceeds of the market manipulation scheme. Under the terms of the settlement, Taub and his family members agreed to forfeit all assets subject to the pending forfeiture complaint in which they have a potential interest. Taub is also required to cooperate with and assist the Justice Department in the orderly transfer, management and disposition of the relevant assets.
U.S. Attorney Carpenito credited special agents of the FBI, under the direction of Acting Special Agent in Charge Joe Denahan in Newark, special agents of IRS – Criminal Investigation, under the direction of Special Agent in Charge Michael Montanez in Newark, and special agents of the U.S. Attorney’s Office, District of New Jersey, with the investigation. He also thanked the Securities and Exchange Commission’s New York Regional Office, under the direction of Marc P. Berger, for its assistance in this investigation.
The government is represented by Criminal Division Deputy Chief Daniel V. Shapiro; Senior Trial Counsel Catherine R. Murphy and Assistant U.S. Attorney Jennifer S. Kozar of the U.S. Attorney’s Office Economic Crimes Unit in Newark; and Unit Chief Sarah Devlin, of the U.S. Attorney’s Office Asset Recovery and Money Laundering Unit.