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Lawyer Pleads Guilty in $20 Million Pump-and-Dump Scheme

February 12, 2018 Blog

Earlier this month, a lawyer in Denver, Colorado pleaded guilty to conspiracy to commit fraud as a result of her role in a nationwide pump-and-dump scheme that reportedly swindled $20 million from approximately 12,000 investors, “many of whom are retirees who lost their life savings.”

The lawyer’s guilty plea follows the confirmation of six other brokers’ and attorneys’ involvement in the scheme, including former Hartford, Connecticut City Councilor Corey Brinson. The scheme was recently summarized in the Hartford Courant:

“[Lawyer Diane] Dalmy, as with Brinson, was accused of signing phony attorney opinion letters that falsely certified the legitimacy of what are known as pump-and-dump, penny-stock transactions. . . .

“In pump-and-dump schemes, conspirators acquire blocks of stock in worthless shell companies and pitch the companies to investors as being on the cusp of a commercial breakthrough . . . [often using] rigged stock trades, phony announcements about business developments . . . and other fraudulent means to pump up share prices of the stock, much of which they control. As share values, which trade for pennies, rise rapidly, salesmen pitch the stocks to unsophisticated investors. As values peak, the conspirators dump, or sell, their stock, causing the value to collapse, and leaving unwitting investors with worthless shares.”

According to the Hartford Courant, the Securities and Exchange Commission (SEC) had previously barred  Dalmy from working in the securities industry, and others involved in the scheme were subject to bars issued by the Financial Industry Regulatory Authority (FINRA) and state banking authorities. Dalmy is currently awaiting sentencing, where she could face up to five years in federal prison, a $40 million fine and $10.7 million in restitution.

Warning Signs of Pump-and-Dump Investment Scams

While investment scams are becoming increasingly sophisticated, they still often exhibit multiple warning signs of fraud. This is particularly the case with traditional scamming methods such as the pump-and-dump scheme described above. For example, some of the hallmarks of investment fraud scams include:

  • Low-cost stocks (while there are legitimate penny stocks, scams frequently target this particular type of investment);
  • Unsolicited emails and phone calls offering information about “can’t miss” investment opportunities;
  • Claims that companies are on the verge of “breakthroughs” or unprecedented technological advancements;
  • High-pressure sales tactics; and,
  • Involvement of brokers, advisors and lawyers who have been disbarred.

Individual investors should be very cautious about pursuing any unsolicited investment opportunities. You should never make an investment decision because you feel pressured to do so, and you should not rely on someone else’s investment advice or recommendations unless you are confident in his or her credentials. FINRA’s BrokerCheck® and the SEC’s Registered Investment Professional database are good places to start, and legitimate professionals should be more than happy to discuss their prior experience and provide client references.

Have You Suffered Sudden and Substantial Investment Losses?

If you have suffered sudden and substantial investment losses and you are concerned about financial fraud, you can contact Zamansky, LLC for a confidential initial consultation. With decades of experience and millions of dollars recovered, we represent individual investors nationwide. To speak with a lawyer about your case for free, please call (646) 663-5628 or request an appointment online today.