A federal judge in Florida entered default judgments in a penny stock fraud case filed by the SEC against Anthony Fareri, his currently inactive broker-dealer Fareri Financial Services (dba Amerifinancial), and relief defendant Anthony Fareri & Associates.  The frauds allegedly took place in 2004 and 2005.

    Fareri Creates Demand, Harary Provides Supply.   The SEC alleges that Fareri worked together with a Florida investor, Paul Harary, to create an artificial market for the 2 stocks. 

• Fareri allegedly defrauded his broker-dealer customers out of more than $4.7mn by purchasing for their accounts worthless shares of 2 shell companies.  This created artificial demand. 
• Harary controlled the supply of the unrestricted shares and sold them.
• Fareri and Harary manipulated the price of the 2 stocks using pre-arranged matched orders to move up the price and to create the illusion of market demand.
• As part of the scheme, Fareri received kickbacks totaling more than $1mn;  he also earned over $160,000 in commissions and/or markups.
• Fareri’s defrauded customers included retirees who had limited investment experience and relied exclusively on Fareri to invest their money in accordance with their conservative risk tolerance and investment objectives.

    Two Shell Companies.   According to the complaint, the 2 shell companies were Secure Solutions Holdings and American Financial Holdings.  Each traded on the OTC market and was quoted on the Pink Sheets.  Fareri pleaded guilty to mail fraud and Harary pleaded guilty to conspiracy to commit mail and wire fraud in parallel criminal actions brought the U.S. Attorney’s Office for the District of Columbia.

Anthony Fareri was ordered to pay $2.5mn in disgorgement and prejudgment interest.  He also was fined $100,000 and permanently barred him from participating in the offering of penny stocks.

Fareri Financial Services was ordered to pay $161K in disgorgement.  Anthony Fareri & Associates was ordered to pay $1.1mn in disgorgement and prejudgment interest. [SEC Litigation Rel. 21874, 3/4]