Install

Get the latest updates as we post them — right on your browser

. Last Updated: 07/27/2016

Extortion Conspiracy Rocks Troubled FBI

Five people, including a current and a former FBI agent, were charged by U.S. federal prosecutors Wednesday with using confidential government information to manipulate stock prices and extort money from companies.

The conspiracy was led by Amr Ibrahim "Tony" Elgindy, a stock adviser who has clashed with regulators and is well-known among traders in small stocks for his aggressive attacks on companies he considers overvalued, according to an indictment unsealed Wednesday in Brooklyn.

Prosecutors said he obtained government information about publicly traded companies and then used that information to predict which stocks would fall and to persuade companies to pay for his silence.

On Tuesday, FBI agents arrested Elgindy, Derrick Cleveland, Troy Peters, Jeffrey Royer and Lynn Wingate. Lawyers for four of the five could not be reached for comment. Stephen McCue, Wingate's lawyer, said she would fight the case and denied any wrongdoing.

The 33-page indictment is another blow to the FBI, which already faces complaints from lawmakers about its response to warnings of potential terrorist attacks before Sept. 11. An FBI spokesman said the bureau was distressed by the indictment. The charges include obstruction of justice, racketeering, extortion and insider trading.

Royer, who worked at the FBI from 1996 until December 2001, gave Elgindy and Cleveland information from confidential government databases about criminal histories and continuing criminal investigations of companies, the complaint said. In return, Royer received more than $30,000 from Cleveland, the indictment says.

Elgindy, who operates two web sites, Insidetruth.com and Anthonypacific.com, and an e-mail stock tip service, then gave the information to his subscribers, hoping to cause the stocks of the companies to fall, the indictment contends. Elgindy is a short seller, an investor who borrows shares and then sells them, hoping to buy them back later at a lower price, pocketing the difference.

After Royer left the bureau to join Elgindy's firm, Pacific Equity Investigations, Wingate, another FBI agent, began to pass along information to Elgindy, according to the indictment. In addition, Royer and Wingate used their access to FBI databases to monitor the progress of the criminal investigation against Elgindy and the other conspirators, the indictment says.

Besides publicizing bad news on companies whose stocks they sold short, the conspirators threatened other companies that they would make negative information public if the companies did not give them free stock.

The suspected extortion and manipulation was apparently mainly confined to smaller companies. The only one mentioned by name, Nuclear Solutions, has a market value of only $2.5 million.