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VIDEO: Pamela Anderson unwittingly helps bilk investors out of $30 million

Canadian born US actress Pamela Anderson

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Pamela Anderson was allegedly duped into participating in a massive stock scam involving defendants in three states, including California.

Federal authorities arrested 14 individuals on Thursday for allegedly masterminding a far-reaching stock manipulation scheme that defrauded 20,000 investors out of $30 million, entailed the use of offshore accounts and shell entities with names like "Dojo," "Picasso" and "Big Dog" — and used actors Pamela Anderson and Eric Roberts as unwitting promoters of the scam.

Anderson appeared in a 33-second video for FrogAds.com, which appeared on YouTube. (FrogAds.com's CEO, Julian Spitari, was one of the men arrested.) FrogAds.com "purported to operate an online bulletin board for classified advertisements," according to a statement from the office of the U.S. Attorney's office. According to U.S. attorney for the Central District of California, André Birotte Jr., she had no idea that she was participating in fraud.

"These folks were very sophisticated," said Birotte.

The arrest followed a pair of grand jury indictments that were unsealed in Los Angeles on Wednesday, as a result of an investigation conducted jointly by the FBI and the IRS. Those agencies set up wiretaps that intercepted 60,000 phone calls and 24,000 text messages.

Superficially, the scheme the defendants are charged with perpetrating resembles a classic "pump and dump" market-manipulation scam.

But Birotte said that the defendants went beyond an exaggeration of the investment prospects of little-known companies operating in sectors such as e-commerce and biotech, where sudden innovations can cause a stock's value to take off.

"They were also to co-opt companies," he said. "And give the appearance that they were legit."

The defendants are from the Southern California area, Arizona and Florida. One defendant, Ivano Angelastri, escaped arrest because he doesn't live in the U.S. Federal authorities are currently pursuing him.

Birotte indicated that the defendants knew what they were doing. "This was not their first time at the rodeo," he said.

Along with Anderson's video, Roberts appeared in a longer video, just over four minutes, for Genmed, "which purported to develop, manufacture and distribute generic pharmaceuticals," according the same U.S. Attorney's statement. Roberts was also an unwitting participant.

Neither Anderson nor Roberts was arrested or accused in connection with the indictments.

Both FrogAds and Genmed had stock that traded on the over-the-counter (OTC) markets, through an informal dealer network known as the "Pink Sheets." These are trades that occur in a financial nether region, involving companies that can't meet the standards of well-known exchanges such as the NYSE and the NASDAQ. Typically, values in OTC market are priced so low that shares are called "penny stocks."

Beyond FrogAds and GenMed, a number of other companies were named in the indictments. The masterminds of the schemes were Sherman Mazur, 63, of Los Angeles and Regis Possino, 65, also of Los Angeles. Passino and several other men were named in both indictments.

The market manipulation scam involved buying up all of, for example, FrogAds.com's stock, then engaging in an elaborate fraud to convince investors that the company had tremendous growth prospects. The defendants allegedly issues fake press releases (in addition to the promotional videos), traded the stock among themselves to inflate its value, paid a stock analyst to promote the stock, and then extracted profits, hiding the money in offshore accounts.

In FrogAds.com's case, the defendants pocketed $7 million in profits, according to the U.S. Attorney. 

If the lower-ranking accused scammers are found guilty, they'll face 100-year sentences. But if the ringmasters are found guilty, they could get life.

"This was a nefarious scheme," Birotte said. "The case is important because [what the defendants are accused of] rubs against fundamental rules of the securities markets. Investors need to be careful. But the defendants created information that wasn't true."

U.S. Attorney release: 14 Arrested For Market Manipulation Schemes

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