Twenty-One Arrested in Securities Fraud Ring

Trenton, NJTwenty-one people have been arrested because of their connection to a securities fraud ring that netted approximately $50 million by scamming investors. The New Jersey State Attorney General Anne Milgram said the scheme was operating from Miami, Florida and Sao Paulo Brazil and was using the securities market in New Jersey to conduct their scheme.

Milgram has said that the criminal organization has operated for at least the last three years under the name of "Heritage Financial." An investigation of Heritage Financial by the U.S. Department of Justice Fraud Task Force, U.S. Postal Inspectors, the F.B.I., the New Jersey Bureau of Securities, and the Brazilian Federal Police uncovered the fraud ring.

It was first the New Jersey Bureau of Securities that started the investigation that later involved the other law enforcement entities. It was through a number of investor complaints that they initiated the investigation.

Indictments in Miami, Florida have been returned on Marcos Macchione and Rodrigo Molina for being involved in the scheme, which involved running a money laundering services for those who were committing the fraud against investors. The major operations took place in both Brazil and Florida, which resulted in 18 Brazil arrests and 3 in Miami. The arrests that took place in Brazil captured the leader of the operation, Don Mukamal, and also netted his partners, associated, and his employees. There were also money launderers that provided their assistance to the organization by opening up a maze of bank accounts that strategically hid the money that investors had sent in to Heritage Financial. The three that were arrested in Florida were associated with the money laundering scheme that was being managed out of Brazil.

How New Jersey investigators became aware of the operations of Heritage Financial is through the complaints filed by investors from all over the world with the Bureau of Securities that said a New Jersey securities broker had taken their money. Heritage Financial was said to be based out of Trenton, New Jersey, but state investigators quickly found that the firm was completely fictitious. This fictitious company was offering to purchase worthless stock from the investors for amounts much more than what the shares were worth.

Right before the transaction was to occur, the fictitious broker would tell the victimized investor that some sort of advance fee was required. They claimed that these fees would take care of the escrow, the taxes, and other services that are not required in trading. Once the fees were wired to the maze of bank accounts, Heritage Financial would not follow through with the transaction.

There were some instances in which imaginary warrants were issued that gave the investors the opportunity to purchase more shares of stocks that they already held at a lower price. At the time, the investors did not know that the warrants were not real and would go ahead and advance the money to Heritage based on the offers that were made to them.

This ploy confused many of the foreign investors investing in the U.S. market. With their well-designed websites and their tactics that made those involved believe that they were a legitimate broker, the perpetrators were able to carry out their scheme until the investors became aware of what was going on and reported the fictitious firm. Heritage even went as far as stealing the identities of real stock brokers out of New Jersey and created false governmental entities in an effort to look more legitimate.

At this point, there has been $2 million seized in the investigation. The money is now being returned to the victims.

By Ginger Gillenwater