Published on August 14th, 2012 | by RLn Staff0
LB Man Pleads Guilty to ‘Pump-and-Dump’ Scheme
SANTA ANA – Chad Peter Smanjak, who resided in Long Beach before he fled the country, faces up to five years in prison after admitting that he orchestrated a “pump-and-dump” stock scheme to generate demand for a penny stock issued by a sports drink company founded by Notre Dame football legend Daniel “Rudy” Ruettiger.
Smanjak, 38, pleaded guilty in U.S. District Court to one count of conspiring to commit securities fraud. As part of the plea deal, Smanjak will be required to pay full restitution to the more than 250 victims of the scheme, although the amount of restitution has yet to be determined.
Smanjak is scheduled to be sentenced Dec. 12, at which time the judge will issue an order on restitution.
Smanjak was arrested in January in Johannesburg, South Africa by special agents with U.S. Immigration and Customs Enforcement’s Homeland Security Investigations Attaché office in Pretoria and members of South Africa’s Police Services. Smanjak waived extradition and voluntarily returned to the United States to face the charges.
This pump-and-dump scheme defrauded investors who were purchasing stock for Rudy Nutrition, a sports drink company touted by Ruettiger and others. The investigation found that Smanjak and his co-conspirators obtained millions of shares of Rudy Nutrition stock (RUNU and RUDN), then “pumped” the stock by issuing false and misleading press releases and by trading shares among themselves. As a result, Smanjak and the others artificially increased the trading volume of RUNU stock and generated the appearance of market demand.
As part of the scheme, Smanjak and the others then “dumped” about 600 million shares of RUNU stock on the market, realizing a profit of more than $5 million. Smanjak paid his trader with a $400,000 Lamborghini Murcielago, which was subsequently seized by HSI.
As part of the scheme, Smanjak worked with others to have more than 600 million shares of RUNU stock issued to several Panamanian companies he controlled. These nominee companies then sold most of the RUNU shares over a five-month period in 2008 until the U.S. Securities and Exchange Commission halted trading of RUNU shares. With money sitting in the brokerage accounts of the Panamanian companies, Smanjak directed others to wire proceeds of the stock sales from U.S. brokerage accounts to Panamanian banks, then back to United States accounts he and his co-conspirators controlled.
Ruettiger, who was the subject of the 1993 movie “Rudy,” served as the CEO of Rudy Nutrition. The company purported to sell health-conscious beverages as an alternative to high-sugar soda and sports drinks. On November 14, 2008, the Securities and Exchange Commission revoked the registration of each class of registered securities of Rudy Nutrition for failure to make required periodic filings with the Commission. In December 2011, the Securities and Exchange Commission filed a complaint against Rudy and 12 others based upon the Rudy Nutrition scheme (see: http://www.sec.gov/news/press/2011/2011-268.htm). In settling the SEC’s charges, Ruettiger agreed to pay $382,866, and he was barred from serving as an officer or director of a publicly traded company.