An indictment unsealed in the Central District of California has revealed a complex Pump and Dump Securities fraud scheme involving the acquisition and sale of Airborne Wireless Network securities. Kalistratos “Kelly” Kabilafkas, 48, of Moorpark, and Jack E. Daniels, 74, of Agoura Hills, are accused of conspiring to defraud investors in a multi-year scheme that allegedly involved misappropriation of funds, false reporting to the Securities and Exchange Commission (SEC), and a deceptive advertising campaign.
According to court documents, Kabilafkas and Daniels conspired to acquire a publicly traded shell company, which they rebranded as Airborne Wireless Network (ABWN). Kabilafkas allegedly used a sham charitable donation of $474,500 to secretly acquire the shell company’s stock.
Pump and Dump Scheme
A pump and dump scheme is a type of investment fraud where the price of a stock or other asset is artificially inflated (pumped up) through misleading or false statements. The fraudsters, who typically already own a large number of shares in the asset, then sell off their holdings at the inflated price (dumping), leaving other investors with overvalued or worthless securities. This practice is illegal and can result in severe financial losses for those who buy into the scheme.
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In this case, Kabilafkas and Daniels conspired to acquire a publicly traded shell company and after the acquisition, Daniels, as Airborne’s president and sole director, and Kabilafkas reportedly filed false reports with the SEC. In these reports, they concealed Kabilafkas’s ownership of all of Airborne’s stock.
In a Pump and Dump scheme, the manipulation of investor funds is central to the fraud. In this particular case, the perpetrators relied heavily on attracting investors to participate in the scheme. To achieve this, they orchestrated advertising campaigns designed to create hype and artificially inflate the value of the targeted securities.
These campaigns were crucial in luring unsuspecting investors into purchasing the stocks at inflated prices, allowing the perpetrators to sell off their own holdings at a profit before the inevitable collapse of the stock price. The Pump and Dump scheme ultimately relies on deceiving investors into believing they are making a lucrative investment when in reality, they are being manipulated for the benefit of the fraudsters.
DOJ Enforcement
The news was shared by the US Department of Justice on its Twitter handle. This platform serves as an official channel for the department to disseminate important updates and announcements to the public.
Through this tweet, the Department of Justice aimed to inform a wider audience about the charges filed against two individuals in California for their alleged involvement in a securities fraud scheme related to Airborne Wireless Network securities.
Two Men Charged in Multimillion-Dollar Pump and Dump Securities Fraud Scheme
????: https://t.co/tcx5Tj9XLH pic.twitter.com/Cq43pQEcb6
— Criminal Division (@DOJCrimDiv) April 30, 2024
The indictment alleges that Kabilafkas and Daniels used investors’ funds to orchestrate a multimillion-dollar advertising campaign aimed at inflating Airborne’s stock price. During this campaign, Airborne’s share price experienced significant but short-lived increases fuelled by the Pump and Dump scheme. It allowed Kabilafkas to sell millions of shares and allegedly profit millions of dollars.
Conspiracy to Commit Securities Fraud
Kabilafkas and Daniels are charged with one count of conspiracy to commit securities fraud and one count of securities fraud. If convicted, they each face a maximum penalty of five years in prison for conspiracy and 20 years in prison for securities fraud using the Pump and Dump technique.
The case is being investigated by the U.S. Postal Inspection Service (USPIS), the FBI, and the IRS Criminal Investigation (IRS-CI), with trial attorneys from the Criminal Division’s Fraud Section and the Central District of California prosecuting the case.