Preet Bharara, the United States Attorney for the Southern District of New York, announced today that DAVID BLECH was sentenced today in Manhattan federal court to four years in prison for securities fraud arising from schemes to manipulate the market for securities of Pluristem Therapeutics, Inc. (Pluristem) and Intellect Neurosciences, Inc. (Intellect) in 2007 and 2008. BLECH manipulated the markets for these securities by selling a portion of his holdings in those companies through deceptive and illegal means calculated to hide his selling activity from the market and minimize the downward pressure that his sales would otherwise have had on the value of the Pluristem and Intellect stock that he continued to hold. BLECH pled guilty to two counts of securities fraud in May 2012 before U.S. Magistrate Judge Frank Maas. He was sentenced today by U.S. District Judge Colleen McMahon.
According to the information and statements made during BLECH’s guilty plea proceeding:
Between January 2007 and May 2007, BLECH acquired significant holdings of Pluristem stock, which was traded on the OTC Bulletin Board, in connection with a private placement offering by Pluristem. BLECH acquired this stock in numerous brokerage accounts that were nominally held in the names of other individuals and entities, but which he, in fact, controlled (the nominee accounts).
In May 2007, BLECH began to sell a portion of his Pluristem holdings. In order to conceal his sales—and thereby mitigate the damage that public awareness of his selling activity would have had on the value of his remaining shares—BLECH caused the various nominee accounts under his control to engage in conflicting activity, with some of the accounts selling Pluristem stock, and other accounts buying Pluristem stock, often on the same day. In total, between approximately May 15, 2007 and September 14, 2007, BLECH used the nominee accounts to sell approximately 150 million shares of Pluristem, while also using the nominee accounts to buy approximately 100 million shares of Pluristem. In so doing, BLECH was able to shed approximately 50 million shares of Pluristem through manipulative and fraudulent trading activity calculated to hide the true nature of his selling activity while indicating false levels of liquidity and demand in the market for Pluristem stock.
In February and March 2008, BLECH engaged in a similar scheme involving the market for shares of Intellect, which was traded on the OTC Bulletin Board. Between 2005 and February 2008, BLECH acquired significant holdings of Intellect stock. As with Pluristem, BLECH acquired this stock in the nominee accounts that were listed in the names of other individuals and entities, but which he, in fact, controlled.
In February and March 2008, BLECH sold a portion of his Intellect holdings. Again, in order to conceal his sales—and thereby mitigate the damage that public awareness of his selling activity would have had on the value of his remaining shares—BLECH caused the various nominee accounts under his control to engage in conflicting activity, with some of the accounts selling Intellect stock, and other accounts buying Intellect stock, often on the same day. In total, BLECH used the nominee accounts to sell approximately two million shares of Intellect, while also using the nominee accounts to buy approximately 1.6 million shares of Intellect. In so doing, BLECH was able to shed approximately 400,000 shares of Intellect through manipulative and fraudulent trading activity calculated to hide the true nature of his selling activity while indicating false levels of liquidity and demand in the market for that stock.
In addition to the prison term, Judge McMahon sentenced BLECH, 57, of New York, New York, to three years of supervised release. BLECH was also ordered to pay forfeiture in the amount of $1,338,000 and a $200 special assessment fee.
Mr. Bharara praised the investigative work of the Federal Bureau of Investigation. He also thanked the U.S. Securities and Exchange Commission for its assistance.
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