New York Accountant Pleads Guilty in Stock Manipulation Scheme

Shaun Greenwald, president of a New York accounting firm, pleaded guilty before U.S. District Judge John Michael Vazquez to one count of securities fraud conspiracy and one count of tax fraud conspiracy.

From 2014 to 2016, Greenwald, Joseph Taub and others conspired to manipulate securities prices of numerous public companies by coordinating trading in dozens of brokerage accounts that they secretly controlled.

These “straw accounts” were held in the conspirators’ own names, the names of their family members and the names of entities they controlled. Many of the accounts were opened in the names of individuals who neither controlled the accounts nor traded the securities held in the accounts.

The fraudulent trades typically involved two types of straw accounts. First, a “winner account” purchased a large block of shares in a particular security. Next, a “loser account” placed multiple small orders in the same security to create upward pressure on the stock price. Once the price of the security moved higher due to the loser account’s manipulative orders, the conspirators sold their large position in the winner account and the shares from any executed trades in the loser account. While the loser accounts would generally lose money, the conspirators expected the gains from the winner accounts to more than make up for them.

Taub was one of Greenwald’s clients. As part of the scheme, Greenwald opened brokerage accounts in his name or entities that he controlled. However, the vast majority of the funding for these accounts was provided by Taub, which Greenwald concealed on the account opening forms.
Greenwald also admitted that he performed accounting services for the conspiracy, including calculated the taxes on profits made from the straw accounts. While Taub did provide the account holders funds for the taxes on his portion of the straw account profits, he failed to declare any of this income on his tax returns.

Each count to which Greenwald pleaded guilty is punishable by a maximum potential penalty of five years in prison and a $250,000 fine, or twice the gross gain or loss from the offense. Sentencing is scheduled for June 5, 2018. Taub was charged by complaint on Dec. 12, 2016.