Man sentenced in LI-based $147M ‘pump and dump’ scheme

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A man who took part in a Melville-based $147 million “pump and dump” stock boiler room was sentenced in federal court in Central Islip on Friday, officials said.

Micheal Watts, of Sugarland, Texas, had participated in a criminal conspiracy to promote and manipulate the price of shares in Hydrocarb Energy Corp. and other companies, according to the U.S. Attorney’s Office for the Eastern District of New York.

Many of the people who lost money in the scheme were elderly and living on fixed incomes, officials said.

A federal jury convicted Watts in 2019, after a three-week trial. Last week, he was sentenced to five years in prison for conspiracy to commit securities fraud, securities fraud, conspiracy to commit wire fraud, money laundering conspiracy and money laundering. Watts was also sentenced to three years’ supervised release after serving his sentence. At an earlier proceeding, Watts had been ordered to pay more than $560,000 in forfeiture and more than $4.4 million in restitution.

“Michael Watts and his co-conspirators lined their pockets with the lifetime savings of hard-working folks across the country with ruinous results,” U.S. Attorney Breon Peace said in a written statement.

The sentencing, he said, “holds Watts accountable for the economic harm he intentionally inflicted on the victims, many of them senior citizens living on a fixed income, and should serve as a warning to others like him that there will be consequences for crimes of greed.”

Officials said that from 2014 to 2016, Watts and others working with the Melville-based boiler room artificially inflated the price and trading volume of Hydrocarb stock. They did so through an illegal cold call campaign that used lies and high-pressure sales tactics to lure victims, including the elderly and the vulnerable, into purchasing stock, according to the U.S. Attorney’s Office.

Watts was one of the largest shareholders in Hydrocarb, officials said, and allegedly knew that the business was in a downward spiral. Officials say that through the boiler room, he dumped more than $2 million of Hydrocarb shares that he owned or controlled on unsuspecting investors in the months leading to the company’s April 2016 bankruptcy. The conspiracy’s market manipulation fraudulently inflated the stock price of Hydrocarb and four other companies by more than $147 million, the U.S. Attorney’s Office said.

All 16 defendants charged in this case have been convicted, officials said.