Promoter’s arrest sheds light on penny stock’s $6 billion jump

A penny-stock firm’s mysterious rise last year to a $6 billion market capitalization that stunned Wall Street was allegedly the work of a California stock promoter who conspired with a network of corrupt offshore brokers.

“We are committed to closing fraudulent offshore safe havens and prosecuting those who seek to abuse the financial markets to enrich themselves,” Acting Brooklyn U.S. Attorney Kelly Currie said in a statement Tuesday.

Mulholland allegedly told another conspirator in a phone conversation recorded by U.S. investigators in May 2014 that he had “all the free trading shares” of Cynk.

“Based on my training and experience, these incredible and unexplainable increases” are the result of “fraudulent market manipulation,” a U.S. investigator said in the complaint.

The Securities and Exchange Commission also sued Mulholland Tuesday, alleging that he surreptitiously accumulated at least 84 percent of another company, Vision Plasma Systems Inc., and then dumped his shares, making at least $21 million.

Mulholland’s arrest in Phoenix followed charges last year against Robert Bandfield, a U.S. citizen accused of stock fraud in a scheme that allegedly involved five executives and offshore brokerage entities including Legacy.

The defendants “set up sham companies with figureheads at the helm in an attempt to deceive U.S. law enforcement and regulators,” Loretta Lynch, then the U.S. attorney in Brooklyn, said when the charges were unsealed in 2014.

In 2011, the agency accused him of involvement in a pump-and-dump manipulation of a sports drink company founded by Daniel “Rudy” Ruettiger, the inspiration behind the film “Rudy.”