BUFFALO, N.Y. (WIVB) — A Brockport man pleaded guilty for his role in a multi-million investment scam that spanned over multiple years, the U.S. Attorney announced Tuesday.
Halford W. Johnson, 60, pleaded guilty to conspiracy to commit securities fraud for defrauding nearly 100 investors through a publicly traded company.
Between September 2013 and April 2018, Johnson, authorities say, conspired co-defendant Darin R. Pastor, to defraud investors of Creative App Solutions, Inc., which was registered with the United States Securities and Exchange Commission.
In September 2013, authorities say, Pastor paid approximately $1,774 to purchase approximately 3.5 million shares of the company’s stock. They say Pastor became the company’s CEO, Johnson was appointed the Chief Financial Officer, and renamed the company as Capstone Financial Group, Inc.
From September 2013 through March 2017, authorities say 95 investors purchased Capstone stock for just under $20 million.
Authorities say Johnson and Pastor “fraudulently represented to investors and potential investors that Pastor had substantial personal wealth.” They say the two men created a Wikipedia page claiming that Pastor had a net worth of hundreds of millions of dollars and misled investors to believe that their money would be used by the company to fund business deals that would generate profits and increase stock value.
The business deals, authorities say, included the building of a gas-to-liquid fuel production facility, the selling of gold to Hong Kong and Australian based companies, the selling of livestock, and multi-million-dollar investments by other companies in Capstone.
Authorities say Pastor fraudulently used millions of dollars, from investors’ money, to pay for personal expenses and fund a “lavish lifestyle” for he and his wife.
They say he used the money for the following:
- Repay debt to a securities firm
- Purchase a $1.5 million house in Clarence
- Purchase a home in Florida for a relative
- Purchasing jewelry worth nearly $300,000
- Paying for his destination wedding in the Caribbean
In December 2016, authorities say, Pastor filed a Form 15 with the SEC, “terminating Capstone’s duty to file periodic and current reports with the SEC.” Authorities say Johnson and Pastor told investors that the company was “going dark.”
In April 2017, authorities say, Capstone offered to buyback shares of the company’s stock from investors and pay them at least four times the amount they initially paid. Authorities say Johnson and Pastor knew that the company did not have sufficient funds to pay investors who had accepted the buyback offer.
In an effort to further lull investors into believing Capstone would fulfill the buyback agreements, authorities say, the company made particle payments to investors, totaling just over $6.7 million. The total loss to investors was $19,807,303.
Johnson is scheduled to return to court on April 2 and faces a maximum sentence of five years in prison.
Pastor was charged but died in March 2023.
- Amendment to extend limits on taxing fuel sales in Erie County fails
- 2-alarm fire breaks out in warehouse in Buffalo
- Billionaire GOP donor endorses Haley, says Trump’s time has ‘come and gone’
- 3 seriously hurt after driver plows into Christmas parade crowd in California
- Texas AG says abortions still prosecutable despite court exemptions