The pump and dump in which hyped marketing is used to sell worthless stocks has been a racket for the Gambino family since at least the 1950s as alleged by a February 1965 FBI report:
[Redacted] Legal Counsel, United States Securities and Exchange Commission (SEC), 225 Broadway, New York, New York, advised on January 6, 1965, that the only case of any importance that he can recall wherein members of organized crime infiltrated the securities business was the case involving Carmine Lombardozzi, Arthur Tortorello; et al, from 1956 through 1959.
In September of 1956, [redacted] a young stockbroker, went to Carmine Lombardozzi and borrowed $60,000 for the operation of an over-the-counter stock company owned by [redacted]. Lombardozzi placed Arthur Tortorello and Louis DeFilippo to oversee [redacted] operation. From that date until December of 1959, [redacted] operated approximately one-half dozen "boiler room operations" of Canadian stocks which ultimately were sold in forty states.
Confidential Source 10 advised that Carmine Lombardozzi received over seven million dollars through the operation of these "boiler rooms."
Lombardozzi and several others were sentenced in Hartford, Connecticut in 1961 for violation of SEC laws. Lombardozzi was sentenced by Judge Robert P. Anderson, United States District Court, Hartford, Connecticut on March 6, 1961, to imprisonment in the custody of the Attorney General for three years, execution of sentence suspended, probation for five years and a fine of $2,500. Tortorello received a like sentence.
On August 20, 1963, Lombardozzi and Tortorello were arrested by agents of the Federal Bureau of Investigation for violation of their probation. They were extradited to New Haven, Connecticut and appeared before Judge Anderson. After agents testified as to Lombardozzi's general disregard of his probation rules, Lombardozzi and Tortorello plead guilty on August 22, 1963. Judge Anderson sentenced them each to one year in prison and they were remanded to the United States Marshal immediately. They were subsequently transferred to the United States Penitentiary, Lewisburg, Pennsylvania.
On April 29, 1963, Lombardozzi, Tortorello and five others were indicted in the Southern District of New York for violation of Federal Income Tax laws resulting from unreported income that they earned as a result of their illicit stock operations. Five of the seven subjects have since plead guilty to one count conspiracy in the above matter and have been sentenced or are awaiting sentence. Lombardozzi and [redacted] have yet to come to trial in this matter.
In May and June, 1963, Confidential Source 8 advised that Carmine Lombardozzi had furnished Arthur Tortorello with $80,000 to finance the sale of National Telepix stock and had placed [redacted] to insure his investment. National Telepix Company, a firm leasing movie films to television, had merged with Canadian Telepix [redacted]. The purpose of the merger also enabled them to sell the stock in an over-the-counter operation to the public. They first arranged to fix a phony market by buying and selling shares between themselves to make the stock price raise in order to make it more desirable to the public. This information was furnished to the SEC, who immediately instituted an intensive investigation. This investigation thwarted the attempt of National Telepix to sell to the public and the scheme was dropped.
In May, 1963, Confidential Source 8 advised that Arthur Tortorello had forced [redacted] and his wife to sell shares of Douglass Precision Parts, Inc. stock in order to secure a bank loan from two New York banks. [Redacted] owned Tortorello shylock money and Tortorello and others had managed to get a $14.00 listing on Douglass stock by a phony manipulation in the market.
[Redacted] and his wife, [redacted], voluntarily furnished information to the Federal Bureau of Investigation and were referred to the United States SEC. As a result of this information furnished to SEC by the Federal Bureau of Investigation, an intensive investigation resulted in guilty pleas from several subjects, including Arthur Tortorello, who subsequently received a one-year sentence for this violation.
Further reading that may be of interest: