federal indictment - Conaway & Strickler

Anatomy of an Options Trading Scheme case in Federal Court in Atlanta

Law Office of Conaway & Strickler — Sun, 26 Jan 2025 18:38:00 GMT

Milan Patel and four other defendants were charged both by the SEC and the Department of Justice for their role in an options trading scheme in the Northern District of Georgia. Another defendant, Bart Ross was sentenced a few years ago for the same scheme. In total, In total, the defendants executed more than 500 trades and made $2,651,320 in profits as a result of their fraudulent scheme. And just last week, Mr. Patel was sentenced.

According to the NDGA DOJ news release:

According to Acting U.S. Attorney Moultrie, the charges and other information presented in court: Between approximately October 2017 and January 2020, Milan Patel, Bart Ross, Mark Melnick, Anthony Salandra, and Charles Parrino conspired to trade securities—primarily short-term call options—in large, publicly traded companies based on materially false rumors about those companies that they generated and disseminated. These materially false rumors were intended to increase the price of the securities (both the underlying stock and options).

Call options are essentially a contract that gives the options’ holder the right, but not the obligation, to buy shares of the underlying stock at a set price per share—the option’s strike price—on or before a set future date (the option’s expiration date). Generally, the holder of a call option benefits when the price of the underlying stock increases. Short-term call options are ones that generally expire within a week.

Ross, Salandra, and Parrino, were formerly registered brokers with the Financial Industry Regulatory Authority (FINRA) and were responsible for drafting some of the fraudulent rumors. The conspirators would often refine a proposed rumor by exchanging drafts among themselves using the Trillian instant messaging application.

Melnick was a day trader and T3 Live Senior Trading Strategist who often provided technical evaluations on whether a particular false rumor would be successful. These rumors were carefully crafted to: (a) appear plausible enough to other market participants to move the price of the underlying security; and (b) move the price of the security in a particular direction—namely move the stock or option price up—so that Patel and the other conspirators could profitably trade on the rumors.

Patel was responsible for disseminating the rumor via Trillian to multiple accounts, which would in turn result in the false rumor being distributed over one or more market subscription services, including Trade The News, TradeXchange, and Benzinga, as well as various Twitter accounts.

Before Patel disseminated the rumor, the co-conspirators would acquire a position in the publicly traded company that was the subject of the rumor. The co-conspirators purchased short-term call options often mere seconds before Patel disseminated the rumor. The conspirators often purchased short-term call options because the price of such options is more sensitive than the price of the underlying stock. The conspirators profited from their scheme by selling the options (or other securities) after they increased in price. They would then sell off their positions shortly after the rumor was disseminated and the price of the option or underlying stock had increased.

Most of these defendants ended up with a plea with one count of conspiracy to commit wire and securities fraud. When you see a case where the original situation with most defendants are charged in an indictment, and it ends with a plea to a one count, criminal information – this is good news. This means that the federal criminal defense lawyer has done their job well and worked out a resolution that limits the sentencing guidelines and ultimate months of incarceration.

In this case, if one has plead to Conspiracy to commit wire and securities fraud, the base offense level would be a 6. There will be an increase pursuant to the chart on what the intended loss amount is. There also can be enhancements such as:

the number of victims
being a registered broker at the time of the offense
abuse of position of trust
sophisticated means
use of a special skill

Then, there can be levels taken off for acceptance of responsibility and zero point offender. And finally, if the defendant has any criminal history the final number will be amended pursuant to Criminal History Category. Once the final number is determined by the judge, the second part of the sentencing hearing will occur – discussing 3553 factors.

Contact an experienced federal criminal defense lawyer like Conaway & Strickler, PC. We have close to 30 years experience in federal criminal and SEC defense.

What is RDAP?

Conaway & Strickler, P.C. — Sun, 22 May 2022 22:45:20 GMT

The Residential Drug Abuse Program (RDAP) and the Non-Residential Abuse Program (NRDAP) are offered by the Federal Bureau of Prisons (FBOP) to assist inmates suffering from substance abuse issues.

RDAP consists of 3 intensive phases, totaling over 500-hours of voluntary individual and group treatment, and it is about 9-12 months long. This program offers prisoners to live in a modified prosocial community within the prison, separate from the general population. They split their day in half with vocational, work, or school activities and the other half in treatment/programs. Prisoners must meet specific requirements to be considered for this program, and space is often limited. The prisoner must have at least 24 months remaining in their sentence to complete the program.

Since some inmates may have less than a 24-month sentence, the FBOP also offers a Non-Residential Drug Abuse Program (NRDAP), where prisoners can participate in 12-24 weeks of Cognitive-Behavioral Treatment. This treatment consists of skill-building within communication, rational thinking, and institution adjustment. NRDAP is often offered in a group setting and is more accessible to prisoners because of the less strict qualifications. NRDAP differs from RDAP because offenders may join this program if they have short sentences, are not eligible for RDAP, or awaiting availability.

The key benefit other than treatment is that those inmates who successfully complete either program may be eligible for a maximum pre-release time in a residential re-entry center, such as a halfway house, where treatment continues thus shortening the actual time incarcerated.

For more information, please click here or feel free to access our blog or contact Conaway & Strickler, PC to discuss this in more detail.

Q&A Grand Jury subpoenas

Conaway & Strickler, P.C. — Thu, 16 Dec 2021 19:49:45 GMT

What is a Grand Jury? The purpose of the grand jury is to determine whether or not there is probable cause to believe that any federal felony has been committed. A typical federal grand jury consists of between 16-23 citizens drawn from the community. The jurors meet in a closed courtroom, with no judge, no accused, no press, and no lawyer but the prosecutor present. This means your lawyer will NOT be present in the closed court room. The grand jurors decide whether or not to indict a person or persons by listening to witnesses and evaluating evidence obtained by grand jury subpoenas. At least 12 grand jurors must find that there is sufficient probable cause in order to return a True Bill, which when signed by the prosecutor becomes the indictment: the formal criminal charge that the government must prove beyond a reasonable doubt at trial. If the grand jury does not find sufficient probable cause, which almost never occurs, then it returns a No Bill. What is a Grand Jury Subpoena? A grand jury subpoena indicates that a grand jury has been impanelled and a criminal investigation is underway. A grand jury subpoena indicates that the federal government/law enforcement believe that you have evidence or could provide testimony that would help them in their criminal investigation. Why did I receive a Grand Jury Subpoena? There are generally three reasons a person may receive a grand jury subpoena. It is the Department of Justice’s policy to advise a grand jury witness of his or her rights if such witness is a “target” or “subject” of a grand jury investigation. A “target” is a person as to whom the prosecutor or the grand jury has substantial evidence linking him or her to the commission of a crime and who, in the judgment of the prosecutor, is a possible defendant. An officer or employee of an organization which is a target is not automatically considered a target even if such officer’s or employee’s conduct contributed to the commission of the crime by the target organization. The same lack of automatic target status holds true for organizations which employ, or employed, an officer or employee who is a target. A “subject” of an investigation is a person whose conduct is within the scope of the grand jury’s investigation. Finally, a “witness” means that the person is not under investigation but has personal knowledge of facts relevant to the grand jury investigation. When a district court insists that the notice of rights not be appended to a grand jury subpoena, the advice of rights may be set forth in a separate letter and mailed to or handed to the witness when the subpoena is served. Advice of Rights

The grand jury is conducting an investigation of possible violations of Federal criminal laws involving: e.g., conducting an illegal gambling business in violation of 18 U.S.C. § 1955
You may refuse to answer any question if a truthful answer to the question would tend to incriminate you.
Anything that you do say may be used against you by the grand jury or in a subsequent legal proceeding.
If you have retained counsel, the grand jury will permit you a reasonable opportunity to step outside the grand jury room to consult with counsel if you so desire.

What Type of Subpoena Have I Received? There are two types of subpoenas: (1) a subpoena duces tecum which commands the person to produce certain documents (2) a subpoena ad testificandum which commands a person to appear before the grand jury on a particular date to testify. A subpoena duces tecum may seek all non-privileged documents and physical evidence including documents or information which another party may have already produced, or information which may readily be available other than from the subpoenaed party. Moreover, a subpoena duces tecum may require the production of original documents. This may be especially important; for example, where it is important to capture notations, erasures, or colored markings on documents that may not show up on copies. A subpoena duces tecum may also be served on anyone at any place in the United States provided that service is proper. Subpoenas may also be served on persons in foreign jurisdictions as long as the government follows certain procedures. During actual Grand Jury testimony, what can my lawyer do? During the proceeding your attorney may be present, but not in the grand jury room since grand jury proceedings are secret. The only persons permitted in the grand jury room are the Assistant United States Attorney, the grand jurors, the witness, and a court reporter. During the proceeding, a grand jury witness may ask to be excused to confer with an attorney before answering each question. While this process is disruptive and a bit awkward, it is absolutely critical to have an attorney present during any grand jury proceeding. Again, your lawyer can’t be with you in the grand jury room, but we can be right outside the room and you have the right to consult with us after each and every question. In fact, you can spend as much time as you need conferring with us, as long as you are not attempting to disrupt the grand jury process. You can also leave the grand jury room in order to brief your attorney about the questions being asked and your responses. In most federal jurisdictions you can also take notes of any questions asked during the grand jury session. These can later be shared with your attorney. NOTE: If a truthful answer to a grand jury question would incriminate you, you can invoke the 5th Amendment right to not incriminate yourself and refuse to answer. Please click here for a good description of grand jury subpoenas. Conaway & Strickler, PC can help you through this process and take the anxiety away from you and your attempt to understand this very complicated process. Call us now at 404-816-5000. Click here for additional blogs.