N.Y. U.S. Attorney: Former CEO Pleads Guilty in Scheme to Defraud Elderly Victims in Sale of Worthless Stock

NEW YORK, Sept. 26 -- The U.S. Attorney for the Southern District of New York, Geoffrey S. Berman, issued the following news release:

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today that KEITH ORLEAN, a/k/a "Jack Allen," pled guilty to participating in a scheme to target elderly persons to solicit purchases of stock in a series of valueless companies through a variety of lies and misrepresentations. ORLEAN pled guilty to one count of conspiracy to commit securities fraud and one count of securities fraud before U.S. District Judge Vernon S. Broderick.

Manhattan U.S. Attorney Geoffrey S. Berman said: "As he admitted today, Keith Orlean purported to offer elderly victims time-sensitive investment opportunities. In actuality, he was selling victims a package of false promises that yielded profit only for him and his co-defendants. Orlean now awaits sentencing for his predatory practices."

According to the allegations contained in the Complaint, the Indictment, and statements made in related court filings and proceedings:[1]

For several years, ORLEAN and his co-defendants operated a fraudulent scheme in which a salesman named "Mike Palmer" would call elderly persons on the phone and offer them what he claimed was a time-sensitive opportunity to buy stock in certain companies. In fact, there was no "Mike Palmer," and the salesman was actually one or the other of ORLEAN's two co-defendants, who were taking turns using the fake alias. The purported time-sensitive investment opportunity was also fabricated by the defendants, as the companies in which they solicited investments were actually companies under their control. In one intercepted phone conversation, Co-defendant-1 described to ORLEAN his strategy for a successful investor sales pitch as: "You ram it down their fucking throat." In another intercepted call between Co-defendant-1 and ORLEAN, upon learning that a particular victim investor died, Co-defendant-1 remarked: "I knew I should have pulled the last $10,000 out of him."

The most recent version of the defendants' phony sales pitch included false representations about an impending initial public offering, or "IPO," for their company, Digital Donations Technologies, Inc. For example, in April 2018, one of the defendants assured a victim investor that "our company is doing great," that the company had an offer for an IPO valued at approximately $300 million, and that defendant KEITH ORLEAN was considering a private sale of the company for more than $1.5 billion. In truth, however, the defendants knew that the company had little or no actual commercial value and that no such IPO or sale was taking place.

The Federal Bureau of Investigation ("FBI") estimates that since April 2014, the defendants have convinced more than approximately 50 elderly persons to purchase stock in companies controlled by one or more of the defendants based on false representations. The defendants appear to have solicited more than $2 million in stock purchases from victims.

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ORLEAN, 61, of Dix Hills, New York, pled guilty to one count of conspiracy to commit securities fraud, which carries a maximum penalty of five years in prison, and one count of securities fraud, which carries a maximum penalty of 20 years in prison. The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

ORLEAN is scheduled to be sentenced before Judge Broderick on January 10, 2020, at 3:00 p.m.

Mr. Berman praised the outstanding work of the FBI.

The prosecution of this case is being overseen by the Office's Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Robert Boone and Andrew Thomas are in charge of the case.

[1] As for ORLEAN's co-defendants, the description of the charges set forth herein constitute only allegations.