In a dramatic courtroom admission, a Canadian trader has owned up to being a cog in a massive penny stock scam that defrauded hedge fund investors of a whopping $215 million. Colin Heatherington, a 49-year-old trader from Vancouver, pleaded guilty to a conspiracy charge of securities fraud and wire fraud as part of a deceptive plot orchestrated by Absolute Capital Management Holdings, a company based in the Cayman Islands operating out of Spain, according to the U.S. Attorney's Office.
Teaming up with the outlawed financier Florian Wilhelm Jürgen Homm, Absolute Funds' founder and chief investment officer, Heatherington manipulated penny stock prices by engaging in practices like cross-trading. The illicit activity falsely boosted the hedge fund's gains, fattening management and performance fees. But the profits were a mirage, and when the funds collapsed, investors were left out of pocket to the tune of more than $215 million. Homm, indicted back in March 2013, is still evading justice as a fugitive.
The shamed trader's guilt admission came before United States District Judge John A. Kronstadt, who is set to determine Heatherington's fate at a sentencing hearing on May 9. Heatherington could face up to 25 years behind bars at maximum. This case unfolded with the watchful eyes of the FBI, receiving help from the Justice Department's Criminal Division's Office of International Affairs, IRS Criminal Investigation, the Securities and Exchange Commission, and the Financial Industry Regulatory Authority (FINRA).
Previously, another player in this scheme, Todd Michael Ficeto, a 57-year-old former Beverly Hills broker, served six years in federal prison after being found guilty on 18 felony counts related to his role in the penny stock manipulation ploy. Ficeto took advantage of his position to collect millions in fees and private gains from these shady trades. Heatherington himself profited by selling his shares of the inflated penny stocks to the Absolute Funds, authorities say.
The prosecution against these financial fraudsters is being spearheaded by Assistant United States Attorneys Cassie D. Palmer of the Public Corruption and Civil Rights Section, Scott Paetty of the Major Frauds Section, and Ian V. Yanniello of the General Crimes Section. Heatherington, after resisting extradition in Canada, made the decision last year to face the music stateside. For those wanting more information, spokesperson Thom Mrozek, Director of Media Relations, is the contact at the U.S. Attorney's Office.
