The firms mainly preyed on inexperienced investors. But two victims who lost more than $1 million each were described as middle-age businessmen. Two others were a National Football League player and a professional tennis player.
Authorities wouldn't name any of the more than 1,000 victims nationwide, but some of them "should have known better because they're sophisticated," state Attorney General Eliot Spitzer said at a new conference.
Two defendants, Hunter Adams and Michael Reiter, were identified as associates in the Gambino organized crime family. An indictment accused them of funneling illicit profits to their mob bosses from First United Equities Corp., a now-defunct brokerage that had offices in Manhattan, Garden City, N.Y., and Woodbridge, N.J. Calls to their attorneys were not immediately returned.
Attorney Joseph Tacopina, representing First United broker James Bila, said his client "was just doing his job. He did nothing improper. We're confident he'll be cleared of any wrongdoing."
Between 1994 and 1998, brokers at First United and two other former boiler-room operations -- Lexington Capital, in Hauppauge, N.Y., and AGS Financial Group, in Manhattan -- used high-pressure sales tactics to sell penny stocks at inflated prices, court papers said. The defendants profited by selling off their own "house shares" before prices crashed, and tens of millions of dollars were laundered through domestic and foreign bank accounts, the papers added.
"Those behind this scam berated and threatened victims, made unauthorized trades, failed to execute sell orders and took their clients for all they were worth," Spitzer said.
A team of federal agents culminated a three-year investigation during raids Thursday morning, resulting in 17 arrests in New York and one each in New Jersey, Florida and California.
The suspects were awaiting arraignment in Brooklyn federal court on charges including securities fraud and money laundering, which carries a maximum sentence of 20 years in prison. Defense attorneys could not immediately be reached for comment.
The case reflects the Mafia's attempts to cash in on the "tremendous profits" on Wall Street, said Robert Cordier, who heads the FBI's criminal division in New York.
Last year, federal prosecutors in Manhattan charged 120 people, including stock promoters and executives of Internet startups, with strong-arming brokers and manipulating penny stocks in another $50 million scheme. The defendants included members and associates of all five New York crime families, authorities said.
