Costa Rica-based fraud foiled |15 July 2014

International crime gangs abusing the Seychelles international financial services sector are being successfully confronted by the Republic’s criminal justice system. Almost R4 million has been permanently confiscated by the Seychelles Supreme Court in a case taken by the Attorney General’s office on behalf of the Financial Intelligence Unit (FIU) against companies and individuals linked to a Costa Rican crime gang.

The funds which were lodged in 13 bank accounts in Seychelles have been transferred to the Republic in accordance with Section 5 of the Proceeds of Crime Act.

The application made to the Seychelles’ Court revealed that Red Sea Management was a “shell” company set up in San Jose, Costa Rica for the criminal purpose of money laundering and operating securities fraud including “pump and dump” schemes.

This criminal organisation had sought to establish offshore companies and offshore bank accounts in Seychelles for help in the fraud.

The fraudulent schemes were designed to market stocks of practically no value in order to defraud investors in public markets.

Red Sea Management Ltd was operated as a money laundering engine that established bank accounts and provided brokerage accounts in the United States and Canada under false pretences and through nominee owners.

The Seychelles investigation began in 2009 and was conducted as a number of criminal and civil actions were being taken against the identified persons in the US.

These included a formal charge of securities fraud brought by the Securities and Exchange Commission (SEC) New York Regional Office and a civil action filed by “defrauded” investors seeking the return of US $7.5 million.
 
Red Sea Management and its affiliates had also been the subject of investigations, searches and arrests by both the FBI and Costa Rican police.

The case in Seychelles has taken almost five years to come to completion having been through the Supreme Court, the Appeal Court and back to the Supreme Court.

Jonathan Curshen, the US citizen who was the principal behind Red Sea Management, was eventually sentenced to 20 years in prison by a jury in May 2012 for his role in a stock manipulation scheme that defrauded investors in a company called CO2 Technologies.

According to a press release by the US Department of Justice, Curshen and a second US citizen, stock promoter Nathan Montgomery, engaged in coordinated trades in conjunction with the issuance of false and misleading press releases that were designed to artificially inflate the price of CO2 Tech shares to make it appear that it had significant business prospects.

These press releases fraudulently ‘pumped’ the market price and stated that CO2 Tech have a business relationship with Boeing to reduce polluting gases emitted from airplanes, when in fact CO2 Tech never had any business or relationship with Boeing.

Curshen and his conspirators eased the dumping of shares through the trading desk at Red Sea Management and Sentry Global Securities by selling the shares to the general investing public.

These shares which became virtually worthless were purchased by unsuspecting investors.

Montgomery and others involved in the scheme were paid approximately US $1 million in cash by their conspirators to take part in the sham stock trades of CO2 Tech. The cash was delivered to them in Miami via a private jet.
 
Other individuals named in the order with Curshen included Francisco Abellan, who was also charged in 2008 by the SEC in the US.

In December, 2009 the Washington District Court entered a summary judgment against the said Francisco Abellan. Abellan was ordered to pay disgorgement of ill-gotten gains and was barred also from taking part in any offering of penny stocks.

Curshen as a result of his criminal activities was stripped of his privileges as a diplomat of the government of St. Kitts and Nevis, for which he had acted as Honorary Consul in Costa Rica.

In this and other cases, the FIU works closely with both local and international partners to ensure that the offshore companies involved are identified and bank accounts in Seychelles are traced and frozen to ensure that criminal organisations which seek to abuse the international financial services sector are stopped and deprived of their criminal proceeds.
 
Red Sea Management and its affiliates Sentry Global have been the subject of sustained cooperation between the Seychelles FIU and the FBI in this case as well as in several others.