Case 1:14-cr-10221-WGY Document 181 Filed 05/09/16 Page 1 of 20

UNITED STATES DISTRICT COURT

DISTRICT MASSACHUSETTS
_____________________________
)
UNITED STATES OF AMERICA )
)
v.
)
)
MICHAEL AFFA,
)
ANDREW AFFA,
)
MITCHELL BROWN,
)
CHRISTOPHER PUTNAM, and
)
CHRISTOPHER NIX,
)
a/k/a GABE NIX,
)
)
Defendants.
)
_____________________________ )
)
UNITED STATES OF AMERICA )
)
v.
)
)
MITCHELL BROWN
)
)
Defendant.
)
_____________________________ )

Criminal No. 14-CR-10221-WGY

Criminal No. 15-CR-10297-WGY

UNITED STATES SENTENCING MEMORANDUM AS TO MITCHELL BROWN

The United States submits this memorandum in advance of the sentencing of defendant
Mitchell Brown. On September 29, 2015, Brown pleaded guilty to all counts of a seven-count
Indictment for his participation in a pump-and-dump scheme to manipulate the market for the
publicly traded securities of Amogear Inc. (Amogear). On December 8, 2015, Brown pleaded
guilty to a two-count Information for his participation in another pump-and-dump scheme
involving the securities of a publicly traded company called Greenway Technology (Greenway).
Both guilty pleas were entered pursuant to a plea agreement with the government under Federal
1

Case 1:14-cr-10221-WGY Document 181 Filed 05/09/16 Page 2 of 20

Rule of Criminal Procedure 11(c)(1)(C). 1 (See Plea Agreement 1 2). Given the nature and
circumstances of these offenses, the need to promote respect for the law and provide a deterrent
effect, and Browns history and characteristics, the United States respectfully submits that a period
of incarceration of 42 months is necessary in order to meet the goals of 18 U.S.C. 3553(a).
BACKGROUND 2
From at least 2012 through 2014, Brown was in the business of promoting the stock of
publicly traded companies for compensation. (PSR 98) (SOF p. 1). In this regard, he was
well-acquainted with pump-and-dump schemes, which generally involve the artificial inflation of
the share price of a publicly traded company, orchestrated by individuals who control a substantial
portion of the companys stock and who then divest themselves of the shares by selling them on
the open market after the price inflation has occurred. (PSR 13, 26 fn. 2). Hallmarks of a
typical pump-and-dump scheme include promotional campaigns featuring false or misleading
news about the company and coordinated trading of the stock to simulate market interest, as well
as drive up the price of the stock. (PSR 13).
The Greenway market manipulation for which Brown was convicted began around
mid-2012, when Brown and his coconspirators agreed to engage in a scheme to artificially inflate,
or pump, the share price of Greenwaya shell company without any active business operations or
1

Hereinafter, the Information refers to the Information in United States v. Brown,

1:15-cr-10297, Dk. #2; the Plea Agreement refers to the Plea Agreement which governs both cases, but
was filed in United States v. Affa et al., 1:14-cr-10221 (D. Mass.) Dk. # 132; and the SOF refers to the
Statement of Facts attached to the Plea Agreement, United States v. Affa et al., 1:14-cr-10221 (D. Mass.)
Dk. # 132-1.
2

Under the terms of Browns plea agreement, he has waived any right to the determination of
disputed United States Sentencing Guidelines enhancements by a jury beyond a reasonable doubt, as well
as any right to an evidentiary hearing. (See Plea Agreement 4). Rather, he has agreed that the Court can
resolve any such dispute by a preponderance of the evidence, and in reliance on the agreed-upon statement
of facts for the Amogear Indictment, the facts stated in the Information for Greenway, as well as any
supplemental materials provided to the Court which are consistent with the statement of facts. (Id. 1,4).

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significant assetsin order to sell, or dump, stock that they controlled into the market at inflated
prices. (PSR 42, 43, 45) (Information 8-10). 3 Brown obtained and deposited the
Greenway shares that he ultimately sold by using backdated debt assignments and false legal
opinion letters. (PSR 45) (Information 13.c., 13.d., 13.i.). Then, after the Greenway stock
was cleared for sale, Brown and his coconspirators caused stock promotion websites that they
controlled or hired to send blast e-mails touting Greenway as a promising business on the verge of
acquiring hotels that would cater to gay and lesbian travelers in several major cities, when, in
actuality, Greenway lacked the means to purchase any such properties. (PSR 44) (Information
11). Brown amplified the impact of the misleading promotional campaign by engaging a stock
trader to falsely inflate Greenways trading volume in order to exaggerate demand for the
companys stock. (PSR 46) (Information 13.g.). As the pump reached full force, Brown and
his coconspirators preyed upon the false hype that they had created by selling millions of shares of
worthless Greenway stock to the public for gross proceeds of $855,586, almost half of which
($420,643) went to Brown. (PSR 48) (Information 13.i.).
In the fall of 2013, Brown was informed by his business associate, Michael Affa, about
another market manipulation opportunity, namely a scheme to pump and dump the publicly traded
stock of Amogear. (PSR 26) (SOF p. 1). 4 Like Greenway, Amogear was a shell company with
no real assets or operations, but unlike Greenway, Amogear was controlled by a former
Boston-based stock promoter (the CW) who was cooperating with the FBI, while still
maintaining the guise of his previous employment. (PSR 12, 14) (SOF p. 1). Of course,
3

The parties have agreed to the accuracy of the facts set forth in the Information. (See Plea
Agreement 1 2.)
4

The parties have agreed to the accuracy of the facts set forth in the Statement of Facts. (See Plea
Agreement 1 2).

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Brown did not know this as he and his coconspirators planned to repeat the success of the
Greenway pump and dump, setting their sights even higher this time with the goal of selling 17
million shares of worthless Amogear stock at an average price of at least 15 to 20 cents per share.
(PSR 27) (SOF p. 2).
By this juncture, Brown was no stranger to market manipulation schemes. He made this
abundantly clear during a face-to-face meeting with the CW in Boston on January 29, 2014, during
which Brown told the CW about at least eight other deals in which he had participated, including
the Greenway pump-and-dump scheme.

BROWN: You know John [inaudible]? . . . Strange dude . . . the first time I met him
was at a rest stop . . . the guy gave us some type of f***ing sales pitch, you know,
like he didnt know who we were. So he was like . . . I dont do these, you know,
short-term deals . . . I stay with a company like 2, 3 years . . . put friends and
family in them. I dont say nothing, let him speak and finish it off, and Im saying
to myself, Yeah, uh huh, youre telling me that you put your friends and family
in start-up pink sheets [stocks] and you stay on these companies for 3 years, 2
years . . . we put up this money and do the deal . . . We do the deal, the day it trades,
you can only do 30% [i.e., sell 30% of the stock in the account] . . . Were at his
[Michael Affas] house, and Im looking and . . . I just explode CW: What
deal was that? BROWN: MCGI or MGCI. 5 (See Recording of 1/29/14 Meeting,
submitted as Exhibit A, at AMOGEAR 18_01_2, 17:24-19:08) (emphasis added).

BROWN: Yeah we did another deal . . . HDRE . . . we had all these people go
[promote the stock]. We made like, it was supposed to be just like liquidation.
Im like I can get rid of all these shares (Id. at AMOGEAR 18_02_1, 2:06-2:17)
(emphasis added).

BROWN: CNOZ . . . Carl 6 f***ed me. . . Couple of people that went and met with
Carl representing me, and they had the shares, they were S-1 registered. They met

Quotations are taken from the Assistant United States Attorneys notes of recorded conversations
that have been provided to the defense. While they do not purport to be verbatim transcripts, the
government believes these quotations to be accurate. The government is filing a separate Appendix today
with copies of two recordings for the Courts consideration at sentencing.
6

Carl appears to be a reference to Carl Marciniak as evidenced by Browns question: You know
Carl Marciniak? (See Exhibit A at AMOGEAR 18_02_1, 12:34-12:36). On December 2, 2015,
Marciniak pled guilty to charges of securities fraud, wire fraud, and conspiracy for his participation in a
market manipulation scheme involving Super Nova Resources, Inc. See United States v. Marciniak et al.,

Case 1:14-cr-10221-WGY Document 181 Filed 05/09/16 Page 5 of 20

him in Vegas . . . there was 20 million S-1 registered shares. They gave Carl 9
million shares. I go, Did you bring back any cash? [They replied]: No, no, its all
good, its all good. . . . I put out news releases on top of news releases. 7 . . . He
[Carl] was going to use this big group [to promote the stock]. I ran up a bill like 80
grand on MarketWire, and he never sent out one f***ing alert. Nothing. . . . The stock
was recorded. It was as clean as this deal. He started selling. He sold like 3
million shares of stock. Sent me 70 thousand dollars. I had to . . . fight with him
to get [the rest of the stock] back. He sent it back . . . but he kept a million [shares].
(Id. at AMOGEAR 19_01_2, 4:40-5:33) (emphasis added).

BROWN: we did a deal with him [Carl Marciniak], I put up the cash and the
stock got halted [by the SEC]. . . We were going to whack the deal up, and cross off
the top, whatever, and the thing got halted [by the SEC]. So the first $180,000 that
settled, I was supposed to get paid, I never got paid. (Id. at AMOGEAR 19_01_2,
5:55-6:54) (emphasis added).

BROWN: My beef with Lou 8 is, they did a deal, ECIT . . . they needed money for IR,
for a program [stock promotion]. They go, You put up 100 [thousand dollars], well
give you back 200 [thousand dollars]. . . . They ran programs [stock promotions].
They did all this stuff. They never paid me the hundred. They made millions of
dollars on that f***ing thing. I still havent gotten paid. (Id. at AMOGEAR
19_01_2, 9:43-10:28) (emphasis added).

BROWN: Greenway Technology . . . I put up all the money for that . . . All of it . .
. I put up the 200 [thousand dollars] . . . we used Psycho [to promote the stock] . . . This
guy Carlos traded it. It traded 2.7 million [dollars] that one first day. (Id. at
AMOGEAR 19_01_2, 10:56-12:02). BROWN: He traded me out of $400,000
worth of stock in 20 minutes . . . I had to give him 40 grand . . . but it was worth
it. (Id. at AMOGEAR 18_02_1, 13:24-13:43) (emphasis added).

2:14-CR-00133 (E.D. Pa.), Dk. ## 1, 175.

7

According to the public filings for Cono Italiano, which trades under the ticker symbol CNOZ,
Brown is CEO of the company. Also, on January 29, 2014, the CW asked Brown So whats the public
company that youve got now? Brown replied, CNOZ. Cono Italiano. (Exhibit A at AMOGEAR
18_02_1, 12:11-12:15).
8

Lou appears to be a reference to Louis Buonocore. (See id. at AMOGEAR 19_01_2,

9:30-10:28). On November 17, 2015, Buonocore pled guilty to charges of securities fraud and conspiracy
for his participation in a scheme to pump and dump the publicly traded securities of YaFarm Technologies.
See United States v. Buonocore, 1:15-CR-10272 (D. Mass.), Dk. ## 1, 15. On November 19, 2015,
Buonocore pled guilty to charges of securities fraud, wire fraud, and conspiracy for his participation in a
market manipulation scheme involving Super Nova Resources, Inc. See Marciniak, Dk. ## 1, 157.

Case 1:14-cr-10221-WGY Document 181 Filed 05/09/16 Page 6 of 20

BROWN: We did MSHU. Then we did Greenway right after it. Then we did
EWRL. 9 (Id. at AMOGEAR 19_01_2, 12:14-12:18) (emphasis added).

One common thread running through most of these deals is a stock promotion (i.e.,
pump) during which Brown and/or his associates sold or attempted to sell (i.e., dump) their
position in the market. Another recurrent theme is the use of manipulative trading techniques.
As Brown explained, he and the Affas work with a trader who takes 10% of the deal. Brown
added, We use him [the trader] on a lot [of deals]. (Id. at AMOGEAR 18_02_1, 12:08-12:21,
13:22-13:24). The CW asked Brown, What does he [the trader] do?

Brown replied, Trades.

He bid supports. He trades (Id. at AMOGEAR 18_02_1, 12:37- 12:41) (emphasis added).
Bid support refers to the practice of posting bids for a stockwith no actual desire to buy itin
order to create the false appearance of demand and thereby keep the stock price from falling too
much during the dump. (See PSR 17). As Browns coconspirator Christopher Nix succinctly
explained at an earlier meeting (which Brown did not attend): theyre just bluff bids. (Id.)
Returning to the January 29, 2014 meeting, Andrew Affa said that when they use their trader, the
stocks trading volume is always tremendous . . . its like 30% more. Brown agreed, prompting
the CW to ask, Is he [the trader] doing double prints? Brown responded, No . . . well yeah,
theyre double prints. (Id. at AMOGEAR 19_01_2, 12:17-12:27) (emphasis added). A
double print refers to a manipulative trading technique whereby a single trade is falsely
printed or reported as two trades, thereby artificially doubling the trading volume reported to the
public for that trade. (See PSR 47). Michael Affa explained how this works when he called
into the January 29, 2014 meeting, stating that the trader will short against the position and then
9

EWRL is the ticker symbol for the stock of Green Energy Renewable Solutions, Inc. On May 4,
2016, two individualsRobert Raffa and David Aubelwere indicted for a market manipulation scheme
involving EWRLs stock between approximately April 2012 and January 2013. See United States v.
Aubel et al., 1:16-cr-10125 (D. Mass.), Dk. #21.

Case 1:14-cr-10221-WGY Document 181 Filed 05/09/16 Page 7 of 20

we fill him. (Exhibit A at AMOGEAR 18_02_2, 17:48-17:52). Thus, instead of a single trade
being reported when Brown and the Affas sold their stock, two trades were reportedi.e., their
traders short sale and Brown/Affas subsequent sale to their trader to cover his short position.
What the public did not know is that this was all prearranged and therefore half of the trading
volume was artificial.
With that as a backdrop, Brown demonstrated his considerable experience with stock
manipulation schemes through his participation in the pump and dump of Greenways publicly
traded securities and the attempted pump and dump of Amogears stock.
The Fact that Greenway and Amogear Were Worthless Was Immaterial to Brown,
Who Promoted the Companies as Promising Businesses in order to Sell Stock
Although Brown knew that Greenway lacked the funds to purchase and develop hotels and
that Amogear was nothing more than a cardboard box of sample clothing items in the corner of a
basement office, none of this deterred him from promoting these companies as promising
businesses and scheming to sell millions of shares of their worthless stock to innocent investors.
To begin with Greenway, the company was a shell as of at least June 2012, without active
business operations or significant assets, and it never had the means to purchase hotels or develop
upscale resorts as Brown and his associates led the public to believe. (PSR 43) (Information
6, 11). However, Browns negative views about the company did not stop him from falsely
promoting Greenway as a promising business venture on the verge of acquiring hotels that would
cater to gay and lesbian travelers in several major cities. (PSR 43, 46) (Information 6, 13.f.)
(See also Exhibit A at AMOGEAR 19_01_2, 10:56-12:02, BROWN: Greenway Technology . . .
I put up all the money for that . . . we used Psycho [to promote the stock].).

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Turning to Amogear, the CW told Brown that the company was nothing more than a box of
samples, that the company had no operations, and that no money was going to be used to fund the
company in the future. Upon hearing this, Browns only concern seems to have been whether
they could get away with it without getting caught, as evidenced by the exchange below:
BROWN:
CW:
BROWN:
CW:
A. AFFA:
CW:
BROWN:
CW:
BROWN:
CW:
...
CW:
BROWN:
CW:

BROWN:
A. AFFA:
CW:

BROWN:
CW:
BROWN:

How much money does the company need?

Were not going to put any money in the company.
Youre not?
No. No, were not putting anything in the company. Its all us.
Um, the websites up or not yet?
The website will be up, beginning of the week.
So is the company actually operating now?
This is basically the company right here [referring to cardboard box].
Um, and weve got, you know, weve got a CEO in place . . .
So what happens when this is all over? And someone comes
knocking?
We got a good CEO that will take care of all that.
Yeah, so nothings going into the company.
So that box is really the whole company.
So that box is some shirts, youre welcome to take what you want.
[laughter] . . . Some shirts, some gym shorts, some boxing gloves . . . and
you know, Im sorry John couldnt make it, you met John before, hes a
very competent guy, hes all, you know, in the past, hes been involved with
companies where hes had to take phone calls. . .
Yeah . . . its not going to be , its under the radar, so, its not going to,
right?
. . . I mean the website will be up.
Yeah, I talked to Tony yesterday. He was on his way to LA to do some
speaking. His wife is going to have the website up by next week, so youll
be able to take some of that content off the website and do some . . .
Next week or this weekend?
Well, theyll probably get it by this weekend. . .
We probably shouldnt start it without the website.

(Exhibit A at AMOGEAR 18_02_1, 7:32-8:00; 9:14-9:56) (emphasis added). Moreover, when

the group began discussing what to put in the disclaimers of the blast e-mails touting Amogears
stock, Brown joked about the company being nothing but a box of t-shirts.

Case 1:14-cr-10221-WGY Document 181 Filed 05/09/16 Page 9 of 20

CW:

M. AFFA:

BROWN:
M. AFFA:
BROWN:
CW:

One of the things I said to Andrew was, we were talking about disclaimers,
about what you guys are going to put in your disclaimer because in the
beginning these guys over at Circle [Nix and Putnam] wanted to put a
million shares in the disclaimer
. . . Whats wrong with him? . . . Yeah, all he should say is that he expects to
receive up to $100,000 or something, I dont know. . . Expects to receive a
sh***y story and be told there was a momo. . . .
How about a box of t-shirts? [Laughter]
Did you check out the company or no?
Huh, Im taking it home. . . Im bringing it home to you.
You can take whatever you want here, we got a pair of boxing gloves here, a
couple hoodies(Id. at AMOGEAR 19_01_1, 2:47-3:49)(emphasis added)

Notwithstanding his knowledge that Amogear was a shell company with no operations,
Brown nonetheless deployed websites that he controlled along with his codefendants to send blast
e-mails touting the companys worthless stock to thousands of recipients. Those e-mails
contained multiple false and misleading statements designed to give the misimpression that
Amogear had several product lines and items on the market which were ready to be sold. (PSR
30) (SOF, p. 2). Additionally, Brown edited a draft press release regarding Amogear before it
was disseminated to the public. That press release contained false and misleading statements
including ostensible information about Amogears nonexistent product lines and the materials that
those supposed products were made from. (PSR 29) (SOF p. 2).
Brown Employed and Recommended Manipulative Trading Techniques
Based on his pump-and-dump experience, Brown seems to have realized that how a stock
appeared to be trading was often just as important as what was being said about the company in the
false press releases and promotions that he and his associates were putting out. Accordingly, at
the January 29, 2014 meeting, Brown suggested that they use a trader to manipulate Amogears
stock price, just as he had successfully done during the Greenway pump and dump. (See Exhibit
9

Case 1:14-cr-10221-WGY Document 181 Filed 05/09/16 Page 10 of 20

A at AMOGEAR 18_02_1, 12:07-13:35, BROWN: Whats your feeling, we work with a trader
. . . He takes 10% of the deal . . . but the money youre paying, I think youre making more money
by paying him to trade . . . He bid supports, he trades . . . We use him on a lot [of deals] . . . I used
him on a deal. He traded me out of $400,000 worth of stock in 20 minutes. CW: What deal?
BROWN: Greenway Technologies.). Further, over the course of the January 29, 2014 meeting,
Brown demonstrated the depth of his knowledge of manipulative trading by talking about three
distinct techniques that can be used to mislead investors about a stocks trading, namely: (1)
walking up a stocks price prior to a promotion with cross trades, (2) engaging in bid support to
prevent the stocks price from falling too much during the dump, and (3) employing double prints
to artificially increase the apparent trading volume i.e., demandfor the stock.
1. Walking Up the Stock Price Prior to the Promotion with Cross Trades
During the January 29, 2014 meeting, the group discussed the price point at which
Amogears stock should be trading before the promotion kicked off, with the CW asking, So what
what price are you thinking about starting this one at? Andrew Affa replied, Were talking
about 20 [cents], and Brown chimed in, 20, 15, 20 [cents] (Id. at AMOGEAR 18_02_1,
11:37-11:44). A little later in the meeting, the CW noted that Amogears stock price was at 10
cents right now, leading him to ask, Were going to start it at 20 cents, what do we do from
here? Brown replied, Were going to walk it up. (Id. at AMOGEAR 18_02_1, 19:0519:09) (emphasis added). After a brief exchange about whether to put out a press release to build
a chart around, the CW offered, maybe we do like the next cross [trade] at like 11 or 12 cents.
Brown replied, Every other penny. So its 10 [cents], do it at 12 [cents], then do it at 14 [cents],
then do it at 16 [cents], all the way to 20 [cents]. (Id. at AMOGEAR 18_02_1, 19:22-19:41)
10

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(emphasis added). In other words, Brown suggested engaging in a series of coordinated trades or
cross trades to artificially increase or walk up the price of Amogears stock to 20 cents before the
promotion commenced. 10
2. Bid Support to Prevent the Stock Price from Falling during the Dump
As noted above, Brown also recommended using a trader named Carlos who engaged in
bid support to trade the Amogear deal. (Id. at AMOGEAR 18_02_1, 12:07-12:40). Brown
bragged that this trader had traded him out of $400,000 worth of stock in 20 minutes during the
Greenway pump and dump. (Id. at AMOGEAR 18_02_1, 13:24-13:30). He later elaborated that
the trader was able to keep it [the stock price] from going backwards, adding that, Hell step in
there and you wont see it go [down] right so quick . . . hell keep it, momentum going. (Id. at
AMOGEAR 19_01_2, 12:29-12:37).
3. Double Prints to Artificially Increase the Apparent Trading Volume
Another benefit of using their trader, according to Brown, was that he traded stocks in a
way that increased the apparent trading volume. As Brown boasted, for Greenway, this guy
Carlos traded it. It traded 2.7 million [dollars] that one first day. Andrew Affa added, The
volume will always be tremendous . . . its like 30% more. This prompted the CW to ask, Is he
[the trader] doing double prints? Brown responded, No . . . well yeah, theyre double
prints. (Id. at AMOGEAR 19_01_2, 12:00-12:27) (emphasis added). As previously
discussed, a double print refers to a manipulative trading technique whereby a single trade is

10

Coordinated trades to artificially increase a stocks price are prohibited by 15 U.S.C. 78i, which
makes it unlawful to engage in a series of transactions in any security . . . raising or depressing the price of
such security, for the purpose of inducing the purchase or sale of such security by others.

11

Case 1:14-cr-10221-WGY Document 181 Filed 05/09/16 Page 12 of 20

falsely printed or reported as two trades, thereby artificially doubling the trading volume
reported to the public for that trade. 11 (See PSR 47).
Brown Sold Millions of Shares of Greenway Stock for Hundreds of Thousands of Dollars
and Intended to Sell Millions of Shares of Amogear Stock at 15 to 20 Cents a Share
The point of using manipulative trading techniques along with false press and promotions
was, of course, to drive up the price of stocks so that Brown and his coconspirators could sell their
worthless shares for the greatest possible gain. During the Greenway pump and dump, Brown
and his coconspirators sold approximately 13 million shares of Greenway stock for proceeds of
approximately $855,586, of which Brown received about $420,643. (PSR 48) (Information
13.i., 19). Indeed, Brown bragged about the proceeds that he had received from the Greenway
pump and dump during the January 29, 2014 meeting, stating that the trader had traded him out of
$400,000 worth of stock in 20 minutes. (Id. at AMOGEAR 18_02_1, 13:24-13:30).
In the January 29, 2014 meeting, Brown also expressed his view that they could sell their
Amogear shares for an average of about 15 cents per share.
CW:
BROWN:
CW:
BROWN:

Were going to start it at 20, whats the goal?

I mean if we averaged . . . we got what 14 million shares, 15 million
17 million . . . by the time its done with this, yeah.
Yeah, who knows what the price will be when its done with them. . . but if
you averaged 15 cents, I did the numbers the other day, if you averaged
15 cents a share, youre talking a million eight, minus expenses, theres
money there. (Id. at AMOGEAR 18_02_1, 20:51-21:14)(emphasis added)

Then, later in the meeting, Brown commented, If, you know, a lot of these other deals are working
at 20 cents, I mean, we could start at 15 cents and bring it up to 25, 30 [cents] if you want. (Id.
at AMOGEAR 18_02_2, 21:11-21:19) (emphasis added). The day after the meeting, on January

11

Engaging in bid support to create the artificial appearance of demand for a stock and employing
double prints to artificially increase the apparent demand for a stock also constitute conduct prohibited by
15 U.S.C. 78i. See Note 10, supra.

12

Case 1:14-cr-10221-WGY Document 181 Filed 05/09/16 Page 13 of 20

30, 2014, the CW spoke with Michael Affa about Amogear, noting that he was really impressed
with Mitch [Brown]. Affa replied, Yeah, we spend, you know, we talk every day. We spend a
sh**load of time together. So hes, he knows whats going on. After a discussion of how much
Brown would pay for the promotional campaign, Affa said, [Brown] asked me the other day, hes
like: You think we can move the first 13 [million shares] or whatever at like 15 [cents]? I said,
Yeah, probably somewhere around there. Hes like, Its 2 million bucks, dude. Im like,
Yeah, I know. (See Recording of 1/30/14 Call with M. Affa, Exhibit B hereto, at 3:10-4:30).
SEC Halts Trading in Amogear and Brown Tells the CW Not to Issue the Press Release
Brown and his coconspirators launched the Amogear promotional campaign between
February 8-10, 2014, sending out blast e-mails to thousands of recipients touting Amogear with
false and misleading statements about the company and the compensation that the entities sending
out the e-mails would receive. (PSR 30) (SOF p. 2). On the morning of February 10, 2014
(which was a Monday), the SEC halted trading in Amogear stock before members of the investing
public could make any purchases. (PSR 32). In a telephone conversation following the trading
halt, Brown urged the CW not to disseminate the press release about Amogear (which Brown had
edited) so that regulators could never say you f***ing put news out, that its a pump. . . (PSR
29, 32) (emphasis added) (See also SOF p. 3).
ANALYSIS
Pursuant to 18 U.S.C. 3553(a), the sentence imposed should be sufficient, but not greater
than necessary, to achieve the purposes set forth in that statute. See 18 U.S.C. 3553(a); see, e.g.,
Kimbrough v. United States, 552 U.S. 85, 101 (2007). In fashioning a sentence, the Court is to
consider the advisory United States Sentencing Guidelines (the Guidelines or USSG) range,
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and then proceed to review the factors set forth in Section 3553(a)(2), although the weighting of
those factors is largely within the courts informed discretion. United States v. Gallardo-Ortiz,
666 F.3d 808, 811 (1st Cir. 2012) (internal marks and citations omitted). 18 U.S.C. 3553(a) also
invite[s] the district court to consider, broadly, the nature and circumstances of the offense and
the history and characteristics of the defendant and the need for the sentence imposed . . . to protect
the public from further crimes of the defendant. United States v. Politano, 522 F.3d 69, 74 (1st
Cir. 2008) (internal marks omitted). The statute also expressly calls for consideration of general
deterrence. See id. The resulting sentence must be reasonable. Kimbrough, 552 U.S. at 111.
Here, a sentence of 42 months is both reasonable and necessary to effectuate the purposes of 18
U.S.C. 3553(a).
I.

Browns Advisory Guidelines Range is 51-63 Months

Under the plea agreement, both parties agree that Browns base level offense is 7; that an

enhancement of 2 should be applied for the use of mass marketing in the Greenway and Amogear
schemes under USSG 2B1.1(b)(2)(A)(ii); and that an enhancement of 2 should be applied for the
use of sophisticated means in the Greenway scheme under USSG 2B1.1(b)(10). Where the
parties disagree is on the size of the loss enhancement under USSG 2B1.1(b)(1). While Brown
has agreed that an enhancement of at least 14 applies for the loss caused by the Greenway scheme,
Brown has reserved his right to argue that 2 additional points should not apply for the intended loss
in the Amogear scheme. On this score, the government agrees with the Probation Departments
analysis that the intended loss amount falls between $1.5 million and $3.5 million for the Amogear
scheme (PSR 56) and when combined with the actual loss of $855,586 caused by the Greenway
scheme, the total loss is between about $3.4 and $4.2 million. Because the figures straddle the
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loss table ranges and because the intended loss in the Amogear scheme is difficult to calculate
precisely, the government further agrees with the Probation Offices use of about $3.4 million as
the total intended loss amount, resulting in an advisory Guidelines range of 51 to 63 months.
A. The Intended Loss for the Amogear Scheme Is Between $1.5-$3.5 Million
The Amogear case, in effect, involved an undercover sting operation, and therefore the
scheme was halted before any victims could incur an actual loss. Thus, the measure of loss for the
Amogear scheme is intended loss. See USSG 2B1.1, cmt. n.3(A) (2015). Intended loss (I)
means the pecuniary harm that the defendant purposely sought to inflict; and (II) includes intended
pecuniary harm that would have been impossible or unlikely to occur (e.g., as in a government
sting operation . . .). Id. n.3(A)(ii). [A] sentencing court is permitted to determine the amount
of intended loss based on a reasonable estimate. United States v. Iwuala, 789 F.3d 1, 13 (1st Cir.
2015) (citations omitted).
Determining the loss amount for the Amogear scheme is relatively straightforward because
there can be no legitimate argument that Amogears stock was worth anything at any time, or
would have been worth anything after the dump: Amogear was a shell company with no real
operations. (SOF, p. 1.) Indeed, as described above, the CW pointed out to Brown that the
company was devoid of any value. In other words, Amogears stock was plainly worthless at the
time that Brown and his coconspirators were planning to inflate its value and dump it onto
unsuspecting investors. See United States v. Zolp, 479 F.3d 715, 719 (9th Cir. 2007) (If the
company whose stock is sold does not legally exist or has no activities, assets, facilities, or any
other source of value, that company has no underlying equity. Absent highly unusual
circumstances, its stock would also be worthless.) (citation omitted); United States v.
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Schwamborn, No. 06-CR-328 (SJF), 2012 WL 6050561, at *3 (E.D.N.Y. Dec. 3, 2012)

(Defendant was responsible for inflating the price of securities that were inherently worthless;
World Cyberlinks produced nothing, earned nothing, and had no assets. In short, the victims loss
on the stock is solely attributable to the fraud.) (citation omitted).
Because Amogears stock was inherently worthless, a reasonable estimate of the pecuniary
harm that Brown and his coconspirators sought to inflict on market participants is the amount of
shares intended to be sold multiplied by the aspired-to price at which the conspirators intended to
sell them. 12 As noted above, Brown himself stated his belief that the coconspirators would be
able to sell their Amogear stock at an average of $.15 per share, if not $.20 per share and above.
Based on the defendants own stated goals, then, the intended loss would be between $2,550,000
(if the 17 million shares were sold at an average of $0.15) and $3,400,000 (if the 17 million shares
were sold at an average of $0.20). 13 Indeed, this was the Courts finding with regard to intended
loss in the sentencing of Browns coconspirator and business partner, Michael Affa.

12

In his objections to the PSR, Brown proposes a different method of calculating intended loss,
namely: (Amogears average share price in the 90 days before the promotion) x (17 million shares) x (.01
because Brown and his coconspirators were affiliates). See Objections to PSR, 56. However, this
method of calculating intended loss should be rejected because (1) it assumes that investors would have
purchased Amogears worthless stock at pre-promotion prices, as opposed to the inflated prices that Brown
and his coconspirators intended to cause with their false promotions and manipulative trading and (2) it
assumes that Brown and his coconspirators would have abided by the law and voluntarily limited their sales
to 1% of Amogears outstanding shares because they were affiliates, when Brown and his coconspirators
repeatedly discussed selling their entire position (i.e., all 17 million shares).
13

The Third Circuit in United States v. Margulies dealt with a similar situation when it affirmed a
district courts decision to calculate intended loss by multiplying the aspired-to price to which the stock
would increase during a stock manipulation scheme by the number of shares held by the defendant: in
seeking to inflate the stock price from 30 cents per share to $2.00 per share, [the defendant] intended a $1.70
per share loss with respect to the 1,475,380 shares he owned or controlled. United States v. Margulies,
442 Fed. Appx 727, 731 (3d Cir. 2011); see also United States v. Reifler, 446 F.3d 65, 109 (2d Cir. 2006)
(the planned inflation by $5 a share, given [the defendants] plan to dump 1.5 to 2 million shares at the
inflated price, indicated an intended loss to shareholders of $7.5 million to $10 million) (internal marks
and citation omitted).

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At the end of the day, Brown easily falls within the Guidelines $1.5-$3.5 million loss level
because he admittedly caused an actual loss of $855,586 through the Greenway scheme, and the
lowest price Brown contemplated selling their 17 million of shares of Amogear stock at was an
average of $.15 per share. 14
II.

A Sentence of 42 Months is Reasonable and Necessary Under 18 U.S.C. 3553(a)

The government believes that 42 months is a period of incarceration that would best reflect

the goals of 18 U.S.C. 3553(a), particularly the need for deterrence and for the sentence to reflect
the seriousness of the offense and promote respect for the law. The conduct which led to Browns
convictiontwo organized schemes to systematically inflate the stock price of shell companies in
order to push their worthless securities on the investing publicis serious, particularly in light of
Browns history of participation in the shadowy world of penny stock promotion. Though Brown
only had a few discussions with the CW, these recorded conversations clearly illustrate how
deeply immersed in the world of pump and dumps Brown was. Brown spoke dismissively about
meeting another stock promoter who didnt know who [Brown] [was] and scoffed at the idea of
putting friends and family in start-up pink sheets [stocks] and . . . staying on these companies for
3 years. (Exhibit A, at AMOGEAR 18_01_2, 17:24-18:10). Tellingly, a good number of the
individuals whom he acknowledged doing deals with have been charged for participating in
pump-and-dump frauds themselves. Moreover, Brown knew full well that pump and dumps were
fast money opportunities, not long-term investments. These were liquidation deals, as he put it.
(Id. at AMOGEAR 18_02_1, 2:06-2:17). Appearances were all that mattered, and Brown
bragged about working with traders who were well-versed in creating a faade of legitimate
14

While at one point Brown mistakenly calculated their expected proceeds at a million eight if
they sold their Amogear stock at an average of $.15/share (Exhibit A, AMOGEAR 18_02_1, 20:51-21:14),
this would still place Brown in the $1.5-$3.5 million loss level (i.e., $1.8 million + $855,586 = $2,655,586).

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trading in a stock to bolster its apparent value. Brown was then able to complete the illusion of
making the stocks that he was selling look legitimate and desirable by sending out false touting
e-mails from websites that he and the Affas controlled, and by paying others to do the same.
Brown is not some first-time market manipulator. He is a repeat offender who has made
hundreds of thousands of dollars (or more) playing the pump-and-dump game. The fact that
neither Greenway nor Amogear, as companies, had any chance of success did not deter Brown
from scheming to sell millions of shares of their worthless stocks by spinning yarns about luxury
resorts and nonexistent product lines. In fact, Brown actually laughed, on tape, at the notion that
Amogear was nothing more than a box and joked about bringing the company home with him.
Clearly, Brown could not have cared less about the innocent investors who were left holding the
bag after he and his coconspirators had sold their stock and moved onto the next pump and dump.
Finally, the First Circuit has noted the significance of sentences that promote general
deterrence in the cases of white collar defendants. See United States v. Mueffelman, 470 F.3d 33,
40 (1st Cir. 2006) (the deterrence of white collar crime was of central concern to Congress in
fashioning sentences for white-collar crime). Stock manipulation schemes present a particular
need to send a strong deterrent message because the perpetrators of such schemes, like Brown and
his coconspirators, contribute to the publics perception that the financial markets are rigged by,
quite literally, rigging the microcap markets through manipulative trading techniques and the
widespread dissemination of false information about the securities being sold. This not only
harms the investors who buy the worthless securities being peddled, but also destroys the publics
trust in these markets, thereby preventing legitimate companies from being able to raise necessary
capital through the sale of their stock. The sentence imposed should therefore be one that sends a

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clear message to all others who would engage in similar unlawful activities: if they are caught
rigging the financial markets, they will face significant consequences.
CONCLUSION
For the foregoing reasons, the government respectfully submits that a sentence of 42
months of imprisonment is not only reasonable, but also necessary to effect the purposes of 18
U.S.C. 3553(a). The United States respectfully requests that the sentence include a fine of
$100,000, 36 months of supervised release, a mandatory special assessment of $900, and an order
of forfeiture in the amount of $420,643.
Respectfully submitted,
JOHN T. MCNEIL
Attorney for the United States
Acting under Authority Conferred
by 28 U.S.C. 51
By:

/s/ Andrew Palid

ANDREW J. PALID
ERIC A. FORNI
Special Assistant U.S. Attorneys
VASSILI THOMADAKIS
Assistant U.S. Attorney

Dated: May 9, 2016

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CERTIFICATE OF SERVICE
I hereby certify that this document, filed through the ECF system, will be sent
electronically to the registered participants as identified on the Notice of Electronic Filing (NEF).
Dated: May 9, 2016
/s/ Andrew Palid
ANDREW J. PALID

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