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August 24, 2006
Fuego Entertainment discusses August 24, 2006 security breach at various online brokerages and the effect on Fuego’s share price
As Fuego continues to receive calls from existing shareholders and potential investors regarding the unusual trading activities on August 24, 2006, and TD Ameritrade’s refusal to allow online trading of our Company stock, management has decided to temporarily post this bulletin on our website to provide a better understanding of these issues. It is important to let everyone know the Company has moved beyond this incident and continues to forge ahead.
At 2:53 PM on July 11, 2006, Fuego Entertainment began trading on the Over the Counter Bulletin Board under the ticker symbol FUGO. In the few weeks prior to August 24, 2006, the price per share of FUGO averaged around 80 to 90 cents on very low average daily volume of a few thousand shares.
To the surprise of Fuego management, and shareholders alike, on August 24, 2006, Fuego stock rose from $.88 per share to an inter-day high of $1.28 per share. Fuego daily trading volume reached a staggering 1,118,070 shares. Ordinarily, an increase in share price would be viewed as a positive event but in this case many online brokerages stopped the trading in Fuego stock the next trading day, citing “suspicious trading activity.” A few days later, all online brokerages, except for TD Ameritrade, resumed trading in Fuego stock. Once online trading resumed, the share price plummeted and for the past few months, it has floated around 20 to 30 cents per share.
The cause of this unexpected rise in price and extraordinarily high trading volume, followed by an equally unexpected plunge in price, remained a mystery until recently. Federal authorities brought securities fraud charges against Aleksey Kamardin, a US citizen with ties to Latvia, whom they allege made more than $82,000 in a six-week scheme that used compromised trading accounts to drive up the price of stock in 14 publicly traded companies.
On August 24, 2006, Kamardin purchased 55,000 shares of Fuego stock. That same day, Kamardin allegedly accessed accounts at E*Trade, TD Ameritrade, Schwab, and Scottrade, liquidated their positions, and purchased a total of 458,600 shares of FUGO. Kamardin then sold all of his Fuego shares at prices ranging from $1.20 to $1.28 per share, making a profit of $9,164.28 in approximately three hours.
When regulators took an interest, Kamardin fled to Russia to hide, according to the SEC. On August 28 and 29, 2006, he wired his fraudulent gains from his online brokerage account to a domestic bank account, and then transferred the funds to a second account owned by his Russian-born roommate. The roommate then immediately wired the funds to a bank account located in Riga, Latvia, according to the Commission.
Kamardin, allegedly part of an East European criminal organization, defrauded investors of $82,960, according to a civil complaint filed by the Securities and Exchange Commission on January 22, 2007. (See SEC complaint: http://www.sec.gov/litigation/complaints/2007/comp19981.pdf ) According to the SEC, no one was safe. Kamardin broke into at least 27 online accounts at E*Trade, Scottrade, TD Ameritrade, J.P. Morgan Chase, and Charles Schwab, and illegally manipulated the share price of 14 publicly traded companies. For a thorough review of the events surrounding Kamardin’s activities refer to this article in The Washington Post:
http://www.washingtonpost.com/wpdyn/content/article/2007/01/25/AR2007012501763.html?nav=hcmodule
Shortly after charges were filed against Kamardin, Fuego management became aware of the situation and most, but not all, of the mystery was solved. What remains to be determined is why TD Ameritrade continues to disallow any online trading in Fuego stock?
Management is also investigating what happened to the 458,650 shares of Fuego stock that allegedly Kamardin purchased via hacked accounts. All investors whose accounts were hacked have been reimbursed by their respective brokers but the disposition of the 458,600 shares of Fuego stock remains a mystery. It is possible these shares were sold back into the market by the brokerages.
It is clear Kamardin’s alleged actions on August 24, 2006, caused the share price of Fuego Entertainment to dramatically decline in the days following and triggered the cessation of online trading that continues to this day at TD Ameritrade.
Management has contacted TD Ameritrade regarding this issue and is expecting a resolution soon.
Fuego’s CEO, Hugo Cancio, owns in excess of 60% of all outstanding shares in the Company and much of the remaining stock is closely held by loyal Fuego shareholders.
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