Springfield Business Owner Ran $1.1M 'Pump-And-Dump' Scheme: U.S. Attorney

SPRINGFIELD, NJ —A Springfield man and owner of a purported business consulting firm was arrested Wednesday for operating a $1.1 million scheme that artificially inflated the stock price of a publicly traded company he controlled, Acting U.S. Attorney William E. Fitzpatrick announced.

James Farinella, 46, of Springfield is charged by complaint with one count of securities fraud. He will make his initial appearance this afternoon before U.S. Magistrate Judge Leda D. Wettre in Newark federal court.

Farinella and others allegedly ran a “pump-and-dump” stock manipulation scheme to fraudulently inflate the prices of Pazoo Inc. (PZOO) from June through December 2012, according to the complaint.

Pazoo apparently had little or no real business operations when it started trading in June 2012, yet Farinella — who controlled 98 percent of the free-trading shares — and other conspirators allegedly “pumped” the price of those shares by making trades between accounts they controlled to look like Pazoo's stock was rising, according to the complaint.

Farinella and his conspirators also sent out misleading promotional materials to lure investors to purchase the stocks, including touting Pazoo as a leading provider of nutritional supplements for people and their pets to further inflate the prices, according to the complaint.

After "pumping" the stocks, Farinella and his conspirators “dumped” them by selling large volumes of the stock to investors at artificially inflated prices. The companies’ stock prices then dropped, causing victims of the scheme to lose money. The alleged stock manipulation scheme generated approximately $1.1 million in gross trading proceeds, according to the complaint.

The securities fraud count carries a maximum potential penalty of 20 years in prison and a $5 million fine.

(Image via Shutterstock)

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