U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 17602 / July 9, 2002
United States v. Mitchell H. Cushing, S3 00-CR-1089 (WHP) (S.D.N.Y.)
On July 3, 2002, former WAMEX Holdings, Inc. ("WAMEX") Chief Executive Officer Mitchell H. Cushing was convicted of one count of securities fraud, one count of perjury, and one count of conspiracy to commit securities fraud, perjury, and obstruction of justice in relation to a U.S. Securities and Exchange Commission ("SEC") investigation of WAMEX. Cushing's conviction was based on his participation in a scheme to manipulate the public market for WAMEX stock by, among other things, issuing false and misleading press releases concerning WAMEX's funding and regulatory approvals to operate its proposed business, an Internet-based Alternative Trading System ("ATS"). Cushing and his co-conspirators obtained approximately $24 million in profits by selling WAMEX stock to the public during the course of the scheme.
The evidence at trial showed that, in the fall of 1999, Cushing entered into an illegal funding agreement with two New York-based stock promoters, Roger M. DeTrano and Edward A. Durante. In exchange for 19.5 million WAMEX shares, DeTrano and Durante agreed to engage in manipulative trading designed to inflate artificially WAMEX's stock price, sell the shares to the public at the artificially inflated prices, and kick-back a portion of the proceeds to Cushing and WAMEX. Cushing assisted DeTrano and Durante in their efforts to drive up WAMEX's stock price by providing a steady stream of phony press releases on behalf of WAMEX.
The evidence also showed that Cushing caused WAMEX to make false and misleading public announcements concerning millions of dollars in funding that had been purportedly raised by WAMEX; WAMEX's attempts to obtain regulatory approval to operate its ATS prior to its announced July 4, 2000 launch date, which was publicly touted as "Investor Independence Day;" and Cushing's supposed vast experience in the investment banking industry. In fact, WAMEX had not raised millions of dollars in funding and virtually all of the financing it did receive was in the form of kickbacks from DeTrano and Durante; WAMEX was not involved in any ongoing efforts to obtain regulatory approval to operate an ATS; and Cushing's investment banking experience consisted of his employment at several notorious boiler rooms that had been shut down by regulators in the United States and Austria.
In early June 2000, Cushing and Russell A. Chimenti, Jr., WAMEX's Chief Administrative Officer, were subpoenaed to testify in connection with the SEC's investigation of WAMEX. The evidence at trial showed that Cushing and Chimenti lied at several points during their testimonies in an effort to conceal the true source of WAMEX's funding and their relationship with Durante. On June 14, 2000, the SEC suspended trading in WAMEX stock and Cushing, Chimenti, and DeTrano were charged criminally by the U.S. Attorney's Office for the Southern District of New York ("USAO"). DeTrano pled guilty to, among other things, securities fraud on January 25, 2002. Chimenti pled guilty to perjury and conspiracy to commit perjury and obstruct justice on March 5, 2002
The SEC sued Cushing, along with Chimenti, DeTrano, and Durante, on October 11, 2001. The Commission is seeking permanent injunctions, disgorgement, and civil money penalties against Cushing, Chimenti, DeTrano, and Durante, and officer and director bars against Cushing and Chimenti. [Securities and Exchange Commission v. WAMEX Holdings, Inc. et al., Civil Action No. 01 Civ. 9056 (AGS) (S.D.N.Y.)]