Man Sentenced After Conspiring In Melville Pump-And-Dump Scheme: Feds

CENTRAL ISLIP, NY — A Texas man and former registered broker was sentenced for his role in a $147 million pump-and-dump stock scheme based in Melville, the United States Department of Justice announced Friday.

Michael Watts, 68, of Sugarland, participated in a criminal conspiracy to promote and manipulate the price of shares in Hydrocarb Energy Corp. (HECC) and other companies, federal officials said. He was sentenced to 60 months in prison for conspiracy to commit securities fraud, securities fraud, conspiracy to commit wire fraud, money laundering conspiracy and money laundering, to be followed by three years’ supervised release. Watts was ordered pay more than $560K in forfeiture and $4,430,354.03 in restitution.

Watts was convicted by a federal jury in October 2019 following a three-week trial.

"Michael Watts and his co-conspirators lined their pockets with the lifetime savings of hard-working folks across the country with ruinous results," said Breon Peace, United States attorney for the Eastern District of New York, in a news release. "Today’s sentence holds Watts accountable for the economic harm he intentionally inflicted on the victims, many of them senior citizens living on a fixed income, and should serve as a warning to others like him that there will be consequences for crimes of greed."

From 2014 to 2016, Watts and others working with a Melville-based boiler room artificially inflated the price and trading volume of Hydrocarb stock, prosecutors said. They did so through an illegal cold call campaign that used lies and high-pressure sales tactics to lure people, including the elderly and vulnerable, into purchasing stock, investigators said.

Watts, who was one of the largest shareholders in Hydrocarb and "therefore knew that the business was in a downward spiral," authorities said, also used the boiler room to dump more than $2 million of Hydrocarb shares that he owned or controlled on unsuspecting investors in the months leading to the company’s April 2016 bankruptcy. The conspiracy’s market manipulation fraudulently inflated the stock price of Hydrocarb and four other companies by more than $147 million, officials said.

All 16 defendants charged in this case have been convicted, the Department of Justice said. Among those who have been sentenced, Jeffrey Chartier, Ronald Hardy and Brian Heepke each received 10 years in prison; Dennis Verderosa received six years; Lawrence Isen received five years;
McArthur Jean received four years; Paul Ewer received three years; and Emin Cohen received
two years.