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Date: 12-21-2020
Case Style:
Case Number: 1:20-cr-00432-LMM
Judge: Leigh Martin May
Court: United States District Court for the Northern District of Georgia (Fulton County)
Plaintiff's Attorney: United States District Attorney’s Office, Atlanta, Georgia
Defendant's Attorney:
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Description: Atlanta, Georgia criminal defense securities fraud lawyer represented defendant charged with conspiracy to commit wire and securities fraud arising from a years-long scheme to manipulate the prices of short-term call options in large, publicly traded companies.
“Ross and others were able to cheat the market by perfectly timing their trades on false rumors of their own design,” said U.S. Attorney Byung J. “BJay” Pak. “We will fight all forms of securities fraud, whether it involves defrauding investors, insider trading, pump-and-dump schemes, or the type of sophisticated market manipulation at issue here.”
“Manipulating the market to fraudulently profit is not a victimless crime,” said Chris Hacker, Special Agent in Charge of FBI Atlanta. “Ross will now be sentenced for fraudulently profiting from the elaborate scheme and hopefully the public’s trust in a fair market will be restored.”
According to U.S. Attorney Pak, the charges and other information presented in court: Between approximately February 2017 and January 2020, Ross and at least four other individuals conspired to execute a scheme in which they traded securities—primarily short-term call options—in large, publicly traded companies (often Fortune 500 companies) based on materially false rumors about those companies that they themselves generated and disseminated. These materially false rumors were intended to drive up the price of the securities (both the underlying stock and options).
Call options are essentially a contract that gives the options’ holder the right, but not the obligation, to buy shares of the underlying stock at a set price per share—the option’s strike price—on or before a set future date (the option’s expiration date). Generally, the holder of a call option benefits when the price of the underlying stock increases. Short-term call options are ones that generally expire within a week.
Ross, who was formerly registered as a broker with the Financial Industry Regulatory Authority (“FINRA”), and the co-conspirators generated the rumors. They would frequently exchange drafts of a proposed rumor among themselves using the Trillian instant messaging application. After a rumor was formulated and finalized, one of the co-conspirators, identified as Individual-1 in the criminal information, was responsible for disseminating the rumor via Trillian to multiple accounts, which would in turn, result in the false rumor being disseminated over one or more market subscription services, including Trade The News, TradeXchange, and Benzinga, as well as various Twitter accounts.
Before Individual-1 disseminated the rumor, Ross and the other co-conspirators would acquire a position in the publicly traded company that was the subject of the materially false rumor. The co-conspirators typically purchased short-term call options before (sometimes just minutes or seconds before) Individual-1 disseminated the rumor. The conspirators often (but not always) purchased short-term call options because the price of such options is more sensitive than the price of the underlying stock. It was therefore possible for Ross and the others to earn a greater percentage return by trading short-term call options rather than the underlying stock. Ross and the conspirators profited from their scheme by selling the options (or other securities) after they increased in price. They would typically sell off their positions shortly after the rumor was disseminated (and after the price of the option or underlying stock had increased).
Ross executed approximately 49 trades based on the generation and dissemination of false rumors, including in March and April 2018, when Ross traded short-term call options in Disney and Ben Franklin Resources, respectively. Overall, Ross earned approximately $35,000 in profits from the scheme.
Bart Ross, 56, of Sandy Springs, Georgia, is scheduled to be sentenced March 26, 2021 at 9:30 a.m., before U.S. District Judge Leigh Martin May.
This case is being investigated by the Federal Bureau of Investigation. The Securities and Exchange Commission, which provided assistance in this case, also filed a civil enforcement action and consent judgment against Ross today in the U.S. District Court for the Northern District of Georgia.
Assistant U.S. Attorneys Alex R. Sistla and Thomas J. Krepp are prosecuting the case.
Outcome: 12/18/2020 7 Minute Entry for proceedings held before Judge Leigh Martin May: Defendant was sworn and advised of his right to proceed with an in-person hearing. The Court found that the defendant waived his right to an in-person hearing and that this hearing could not be further delayed without interfering with justice. The defendant entered a guilty plea to count 1 of the Information. The Court accepted the plea as knowingly, voluntarily, and intelligently made. Sentencing is set for March 26, 2021 at 9:30 a.m. The Court requires sentencing memorandum and any other information that a party wants the Court to consider in connection with the sentencing be submitted to the Court and served on opposing counsel 5 business days before the sentencing hearing. A party who intends to present evidence at the sentencing hearing shall advise the Court and opposing counsel of the identity of each witness and the estimated length of the testimony for each witness 3 business days before the sentencing hearing. It is not necessary that such notice be provided for general character witnesses. If the Government is seeking forfeiture, any proposed forfeiture order must be filed on CM/ECF 3 business days before the sentencing hearing. (Attachments: # 1 Guilty Plea and Plea Agreement) (Court Reporter Montrell Vann) (ddm) (Entered: 12/18/2020)
12/18/2020 8 NOTICE OF SENTENCING Set as to Bart Ross for 3/26/2021 at 09:30 AM in ATLA Courtroom 2107 before Judge Leigh Martin May. The parties are to file sentencing memorandums on CM/ECF five (5) business days prior to the sentencing hearing. Children under the age of thirteen (13) will not be permitted to attend the sentencing hearing without prior approval from the Court. (ddm) (Entered: 12/18/2020)
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