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Proprietor And Principal Of Funding Agency Discovered Responsible Of Insider Buying and selling And Funding Fraud Scheme | USAO-SDNY

Audrey Strauss, the USA Legal professional for the Southern District of New York, introduced right this moment that, following a two-week trial presided over by U.S. District Decide Edgardo Ramos, and roughly one hour of deliberations, DONALD BLAKSTAD, the proprietor and principal of a California-based funding agency, was discovered responsible on all counts for committing insider buying and selling and a securities providing fraud scheme.  BLAKSTAD’s offenses yielded greater than $7 million in legal income. 

U.S. Legal professional Audrey Strauss stated:  “As a unanimous jury discovered, Donald Blakstad used his connections to an organization insider to assemble inside data that he and his associates then traded on, raking in additional than $6 million in unlawful income.  As well as, Blakstad defrauded investor purchasers out of extra $1 million, funds he purported can be invested however he as a substitute misappropriated, in some instances for private bills.  Now Donald Blakstad awaits sentencing for his crimes.”

In response to the allegations contained within the Indictment and the proof offered at trial:

BLAKSTAD was a inventory dealer and the proprietor and principal of an funding fund often known as Midcontinental Petroleum Inc. (“Midcontinental Petroleum”), which presupposed to be within the enterprise of soliciting investments within the vitality trade.  Martha Bustos was a former licensed public accountant who labored within the finance division at Illumina, Inc. (“Illumina”), a San Diego-based biotechnology firm whose securities commerce on NASDAQ.  By advantage of her employment at Illumina, Bustos had entry to materials nonpublic details about Illumina’s monetary situation, together with its earnings. 

On a number of events, from 2016 via 2018, BLAKSTAD obtained inside details about Illumina’s monetary situation from Bustos earlier than Illumina publicly introduced its earnings and monetary outcomes.  As BLAKSTAD knew, Bustos owed an obligation to maintain inside details about Illumina confidential. 

BLAKSTAD, conscious of Bustos’s breach of obligation to Illumina, used this inside data to make worthwhile trades in Illumina securities shortly earlier than Illumina’s earnings bulletins.  At instances, BLAKSTAD tipped his associates in order that they might commerce Illumina inventory and choices based mostly on the within data.  At different instances, with a purpose to keep away from detection, BLAKSTAD organized for his associates to buy Illumina securities for BLAKSTAD’s profit in accounts managed by his associates. 

Following the general public announcement of Illumina’s earnings, BLAKSTAD and his associates offered the Illumina securities at a major revenue, generally exceeding greater than 2,000 p.c.  In complete, BLAKSTAD and his associates made greater than $6 million in income from buying and promoting Illumina securities. 

As well as, from not less than in or about 2015 via not less than in or about 2019, BLAKSTAD devised and operated a securities providing fraud to fraudulently receive greater than a $1 million from a lot of buyers.  BLAKSTAD fraudulently induced sufferer buyers to make up-front, lump-sum investments for securities issued by Midcontinental Petroleum, which funds BLAKSTAD then misappropriated, in substantial half. 

To facilitate the scheme, BLAKSTAD made false and deceptive representations to investor victims relating to how their funding funds can be utilized.  Throughout the scheme, at BLAKSTAD’s path, victims transmitted their funds, together with by wire switch, into financial institution accounts that had been managed by BLAKSTAD.  As soon as he obtained these investor funds, BLAKSTAD didn’t use them for the needs he had represented to buyers.  As a substitute, BLAKSTAD diverted a considerable portion of victims’ funds to himself and to co-conspirators.  For instance, BLAKSTAD used the funds to pay for quite a lot of private bills and for functions that had been unrelated to the enterprise of Midcontinental Petroleum. 

BLAKSTAD additionally made a sequence of false and deceptive statements to victims designed to keep away from detection, perpetuate the scheme, and hold the sufferer funds he acquired on account of the fraud.

*                *                *           

BLAKSTAD, 62, of San Diego, California, was convicted on all counts of the Indictment.  He was convicted of 1 depend of conspiracy to commit securities fraud, two counts of securities fraud, one depend of conspiracy to commit wire fraud, and one depend of wire fraud for his participation within the insider buying and selling scheme.  He was additionally convicted of 1 depend of conspiracy to commit securities fraud and wire fraud and one depend of wire fraud for his participation within the securities providing fraud scheme.  The securities fraud counts and the conspiracy to commit wire fraud depend every carry a most sentence of 20 years in jail.  The conspiracy to commit securities fraud and the conspiracy to commit securities fraud and wire fraud counts every carry a most time period of 5 years in jail.  The utmost potential sentences on this case are prescribed by Congress and are offered right here for informational functions solely, as any sentencing of the defendant can be decided by the Court docket.

BLAKSTAD is scheduled to be sentenced earlier than Decide Ramos, who presided over the trial, on October 28, 2021, at 11:00 a.m. 

Bustos pled responsible in June 2019 for her participation within the insider buying and selling scheme.  Bustos, who’s cooperating with the Authorities, has but to be sentenced.

Ms. Strauss praised the excellent investigative work of the Federal Bureau of Investigation.  Ms. Strauss additionally thanked the Securities and Trade Fee, which introduced a separate civil motion.

This case is being dealt with by the Workplace’s Securities and Commodities Fraud Unit.  Assistant U.S. Attorneys Edward A. Imperatore and Jared Lenow are in command of the prosecution.  

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