Greek-Americans Charged In $5M Investor Fraud Scheme

Manhattan U.S. Attorney Preet Bharara. (AP Photo/Kathy Willens, File)

NEW YORK – The US Attorney for the Southern District of New York, and FBI, announced the unsealing of an indictment charging George Doumanis, Emanuel Pantelakis, a/k/a “Manny,” and Danny Pratte with orchestrating a scheme to defraud investors of at least approximately $5 million with a fraudulent plan to invest in fuel cell technology.

Doumanis and Pantelakis will be presented and arraigned later today before United States Magistrate Judge Gabriel W. Gorenstein. PRATTE is expected to surrender today to the FBI in Denver, Colorado. United States District Judge Andrew L. Carter Jr. will hold an initial conference in the case on March 6, 2017, at 1:00 pm.

Manhattan U.S. Attorney Preet Bharara said: “As alleged, George Doumanis, Emanuel Pantelakis, and Danny Pratte deceived investors with a fraudulent plan to invest in fuel cell technology. In reality, all they were allegedly fueling was their own greed-inspired scheme to bilk investors and use the money to pay credit card bills, for a Mercedes Benz, and a horse trainer. Doumanis and Pantelakis allegedly committed their fraud scheme after being banned for life from the securities industry by the SEC and FINRA.”

FBI Assistant Director-in-Charge William F. Sweeney Jr. said: “Doumanis, Pantelakis, and Pratte are charged with defrauding Terminus investors by selling them shares of a product that was, essentially, nonexistent. They allegedly did so while intentionally misrepresenting to investors the rate of commission individuals acting as broker-dealers would receive for Terminus stock sold. In the end, as alleged, nearly three quarters of the money obtained by investors was swindled for the collective benefit of those involved. Despite the fact that Doumanis and Pantelakis had been disciplined in the past for their role in other fraudulent securities-related activities, they allegedly participated in this scheme undeterred. Investors deserve to be told the truth, plain and simple, and we’re committed to uncovering it.”

According to the Indictment unsealed on Tueasday in Manhattan federal court as published in US Attorney for the Southern District of New York’s website:[1]

In September 2003, DOUMANIS was convicted in the United States District Court for the Southern District of Florida of conspiring to commit securities fraud, wire fraud, and mail fraud. In addition, in or about June 2005, as a result of an action brought by the United States Securities and Exchange Commission (“SEC”), DOUMANIS was permanently barred from, among other things, participating in any offering of any penny stock and from any association with any securities broker or dealer.

In March 2008, PANTELAKIS was permanently barred by the Financial Industry Regulatory Authority (“FINRA”), a self-regulatory body for the securities industry, from association with any FINRA member in any capacity, following allegations that he “fraudulently misrepresented and omitted material facts to public customers in connection with the sale of securities.”

From at least in or about February 2008 through at least in or about 2014, DOUMANIS, PANTELAKIS, and PRATTE engaged in a fraudulent scheme to defraud investors by inducing them to purchase shares of Terminus Energy, Inc. (“Terminus”), through false and misleading representations and then misappropriating the victims’ funds for their own purposes. PRATTE was the Chief Executive Officer of Terminus, a company that was purportedly working to develop a “fuel cell,” a type of alternative energy source. As set forth in more detail below, contrary to representations made to potential investors, Terminus never had a working fuel cell prototype, was never close to manufacturing a commercially viable fuel cell, and never sold any fuel cells.

Between 2008 and 2011, Terminus entered into a number of contractual agreements with third parties, the stated purpose of which was to develop a fuel cell. In each and every case, however, Terminus made only one or two payments on these contracts before ceasing payments. As a result, the third parties ceased work pursuant to the contracts and terminated the agreements.

Notwithstanding the utter lack of progress and the cancellation of Terminus’s contractual relationships, DOUMANIS, PANTELAKIS, and PRATTE drafted and caused Terminus to distribute false and misleading press releases, private placement memorandums, business plans, and other documents that touted the existence of a fuel cell, the existence of Terminus’s contractual relationships, and the use of investor proceeds to make payments on the contracts.

In addition, DOUMANIS, PANTELAKIS, and PRATTE drafted and distributed private placement memorandums that falsely stated that registered broker-dealers would be paid no more than a 10 percent sales commission plus three percent unaccountable expenses for all Terminus shares sold through their efforts. In truth, unregistered salespeople sold Terminus shares in return for undisclosed commissions far in excess of 13 percent.

Rather than use investor funds as promised, DOUMANIS, PANTELAKIS, and PRATTE misappropriated the money for their own purposes. Of the more than approximately $5 million raised from investors: (a) PRATTE received at least $990,000; DOUMANIS, certain entities affiliated with DOUMANIS, and certain of his family members received at least $570,000, a portion of which was utilized for items such as making payments to various credit cards and payments toward DOUMANIS’s residential mortgage; (c) PANTELAKIS and certain of his family members received at least $420,000, a portion of which was utilized to make payments to various credit cards and for his wife’s Mercedes-Benz; (d) one unregistered salesperson (the “Salesperson”) received payments of at least $540,000, an entity associated with the Salesperson received at least $100,000, and a horse trainer working for the Salesperson received at least $132,000; and (e) other unregistered brokers selling Terminus shares collectively received payments of at least $1,019,624. Thus, in total more than 70% of the investor funds obtained by Terminus were misappropriated by DOUMANIS, PANTELAKIS, and PRATTE, the defendants, or used to pay commissions to unregistered salespeople.

DOUMANIS, 58, of Rocky Point, New York, was arrested today in Suffolk County. PANTELAKIS, 42, of Flushing, New York, was arrested today in Queens. PRATTE, 62, of Columbia, Missouri, is expected to turn himself in to the FBI in Denver, Colorado, today. Each of the defendants are charged with one count of conspiracy to commit securities fraud, which carries a maximum sentence of five years in prison; and one count of securities fraud, one count of conspiracy to commit mail and wire fraud, and one count of wire fraud, each of which carries a maximum sentence of 20 years. The charges also carry a maximum fine of $5 million, or twice the gross gain or loss from the offense. The statutory maximum sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencings of the defendants would be determined by the judge.

Mr. Bharara praised the investigative work of the FBI, and thanked the SEC, which has filed civil charges in a separate action.

The charges were brought in connection with the President’s Financial Fraud Enforcement Task Force. The task force was established to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. attorneys’ offices, and state and local partners, it is the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets; and conducting outreach to the public, victims, financial institutions and other organizations. Since fiscal year 2009, the Justice Department has filed over 18,000 financial fraud cases against more than 25,000 defendants. For more information on the task force, please visit www.StopFraud.gov.

This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Rebecca G. Mermelstein and Christine I. Magdo are in charge of the prosecution.

The allegations contained in the Indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty.

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