Vancouver men face possible prison terms after guilty pleas in U.S. stock fraud schemes

A Vancouver businessman has pleaded guilty to conspiring to commit securities fraud in a U.S. investigation into stock manipulation schemes that prosecutors say cost investors more than US$1 million.

Zoltan Nagy, 60, pleaded guilty on Oct. 20 in federal court in Atlanta, the U.S. attorney’s office for the Northern District of Georgia said. He faces up to five years in prison and is scheduled to be sentenced on Jan. 20, 2027. Three other Vancouver residents previously pleaded guilty to charges arising from one of the schemes: Richard Tang, 49, faces up to 20 years in prison, while Phillip Sewell, 65, and Davies Wong, 67, each face up to five years. Another alleged co-conspirator, Rahim Mohamed, 50, of Calgary, remains at large as police seek information about his whereabouts.

Prosecutors allege the conspirators compromised U.S. online brokerage accounts and forced purchases of shares in companies they controlled, allowing associates to sell their holdings at artificially inflated prices. U.S. Attorney Theodore S. Hertzberg said in a statement that the defendants carried out sophisticated stock-price manipulation that harmed investors and undermined confidence in the market.

Lotus Bio-Technology scheme

Investigators say Nagy was the sole officer and director of Lotus Bio-Technology Development Corp., a publicly traded penny-stock company with the ticker LBTD. By early August 2017, prosecutors say Nagy and co-conspirators Tang, Wong and Sewell controlled most of the company’s shares available for public trading.

Later that month, Mohamed and another co-conspirator allegedly hacked into a U.S. brokerage account and forced it to buy 200,000 Lotus shares. At the same time, Wong and others sold 261,000 shares. Prosecutors say most were ultimately bought through the compromised account at inflated prices. The attorney’s office says the same scheme was carried out again the following month on a “significantly larger scale.”

On Sept. 19, 2017, Mohamed or someone acting at his direction allegedly hacked into 24 customer accounts at multiple U.S. online brokerage firms and forced them to buy millions of Lotus shares. While the compromised accounts bought the stock, Wong and his co-conspirators sold about 7.75 million shares, generating nearly US$1.1 million in proceeds, prosecutors say. Investigators say the money was then divided among Nagy, Wong, Tang, Sewell, Mohamed and others.

FBI Atlanta Special Agent in Charge Marlo Graham said in a statement that the defendants manipulated the stock market for financial gain, exploited investors and compromised brokerage account security to carry out their schemes.

Gaming company scheme

A second alleged scheme involved Good Gaming Inc., a publicly traded penny-stock company with the ticker GMER. Glenn Laken, 72, of Chicago, was the chief executive officer, chair and controlling shareholder of a separate company that owned 61 per cent of Good Gaming by late 2017.

In early January 2018, prosecutors say Tang co-ordinated with Laken to transfer approximately 2.9 million Good Gaming shares into accounts held by co-conspirators. Mohamed or someone acting at his direction then allegedly hacked into several U.S. brokerage accounts and forced purchases of more than one million Good Gaming shares. At the same time, other conspirators sold more than 700,000 shares they had obtained from Laken, generating nearly US$170,000. Prosecutors say the proceeds were divided among Laken, Tang, Mohamed and others.

Laken pleaded guilty to conspiracy to commit securities fraud last month and is scheduled to be sentenced on Jan. 13, 2027. The U.S. attorney’s office said he was previously convicted in 2002 of racketeering conspiracy, wire fraud and other offences related to pension fund fraud and stock manipulation.

Co-conspirators await sentencing

The U.S. attorney’s office said Nagy’s co-conspirators from Vancouver each pleaded guilty to one count of conspiracy to commit securities fraud, and all are scheduled to be sentenced in January.

In addition to possible prison terms, the men may be ordered to pay restitution to victims and fines of up to US$250,000 or twice the amount of the gain or loss, whichever is greater, the office said.