Long Island Man Pleads Guilty To Stock Manipulation

On Wednesday, Ira Shapiro, the former Chief Executive Officer of CodeSmart Holdings, Inc. (“CodeSmart”), a publicly-traded company, and Darren Ofsink, a Manhattan attorney and founder of Ofsink LLC, pleaded guilty to one count of conspiracy to commit securities fraud for their participation in a $86 million market manipulation scheme involving CodeSmart.

According to court filings, in early May 2013, the Shapiro, 56, and Ofsink, 48, a Merrick resident, along with their charged co-conspirators, engineered a reverse merger of CodeSmart, a private company, with a public shell company. After gaining control of CodeSmart’s three million purportedly unrestricted shares, they fraudulently inflated CodeSmart’s share price and trading volume and then sold their shares at a profit when the price reached desirable levels — a scheme commonly referred to as a "pump and dump."

The first pump and dump occurred between May 13, 2013 and Aug. 21, 2013. During this period, the co-conspirators manipulated CodeSmart’s stock price by raising it from $1.77 to a high of $6.94 (a 291 percent increase), before causing it to drop to $2.19 (a 217 percent decrease). The second pump and dump occurred between Aug. 21, 2013 and Sept. 20, 2013. The stock was manipulated by raising it from $2.19 to a high of $4.60 (a 104 percent increase), before causing it drop to $2.13 (a 116 percent decrease).

CodeSmart’s market capitalization at its highest closing price of $6.94 per share on July 12, 2013 was $86,347,800. However, that same day, CodeSmart filed with the U.S. Securities and Exchange Commission an amended Form 10-K, in which it listed only $6,000 in total assets, $7,600 in revenue, and a net loss of $103,141. By Dec. 30, 2013, CodeSmart’s stock was trading at $0.66 per share, and on July 9, 2014, its stock closed at $0.01 per share.

When sentenced, Shapiro and Ofsink each face up to five years in prison, a fine and the forfeiture of criminal proceeds. They will also be required to make full restitution to their victims.

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