A popular American short seller who became famous for his remarkable stock tips has been charged with insider trading and racketeering in what U.S. authorities allege is a scam that involved two FBI agents.
Amr (Anthony) Elgindy and two co-workers allegedly used police information obtained from FBI agents to target companies for short selling.
Short selling involves selling borrowed shares in the hope of buying them back at a lower price and pocketing the difference.
The U.S. Federal Bureau of Investigation agents and Mr. Elgindy's co-workers also have been charged.
The allegations "reveal a shocking partnership between an experienced stock manipulator and law enforcement agents," said Alan Vinegrad, the U.S. Attorney for the Eastern District of New York.
Some of the trades were done through Global Securities Corp. of Vancouver, according to an indictment filed in a New York court. Global officials were unavailable for comment. Mr. Elgindy also was not available.
The U.S. Attorney also is seeking a court order to seize money Mr. Elgindy and his wife kept in U.S. and Canadian accounts, plus several cars. They also hope to seize his house near San Diego, bought last year for $2.2-million (U.S.).
Mr. Elgindy, 34, runs Insidetruth.com, an investment site; AnthonyPacific.com, a subscription e-mail service; and Pacific Equity Investigations, dedicated to stopping improper on-line investing.
His newsletters (he charges $600 for an annual subscription) and postings on sites such as Silicon Investor, a stock chat service, are among the most popular on the Net and are famed for blunt commentary.
According to yesterday's indictment, Mr. Elgindy met Jeffery Royer, an FBI agent in Oklahoma, in 1999. Mr. Royer, who later moved to an FBI office in New Mexico, was soon allegedly giving Mr. Elgindy information from FBI computers about continuing investigations. In return, Mr. Elgindy allegedly paid Mr. Royer a total of $30,425 between November, 2000, and May, 2001.
The indictment alleges Mr. Elgindy used the information to target companies for short selling. In one case, he allegedly obtained the criminal record of Paul Brown, founder of Nuclear Solutions Inc., an Idaho-based radioactive waste disposal company.
Mr. Elgindy shorted the stock and then posted messages in 2001 about Mr. Brown, who died earlier this year. The postings included: "Dr. Paul Maurice Brown is a convicted felon" and "convicted felon Brown . . . has a history of lying & fraud." Company shares fell to $1.55 from $3.20 in six weeks.
Mr. Elgindy also allegedly used the FBI information to extort payments from companies in return for not shorting their shares.
In December, 2001, Mr. Royer resigned from the FBI and took a job at Mr. Elgindy's company. Mr. Royer then allegedly began trying to recruit other agents. He eventually cultivated Lynn Wingate, an agent in New Mexico. She allegedly began providing FBI information to Mr. Royer in March, 2002. She and Mr. Royer also told Mr. Elgindy about grand jury investigations into his company.Report Typo/Error