Two Charleston stock promoters were arrested Wednesday and are accused of manipulating shares of a shell business that federal investigators secretly controlled as part of an elaborate sting.
Christopher R. Putnam, 37, of Vista Perch Lane and Christopher G. "Gabe" Nix, 34, of Needle Grass Drive were taken into custody and face charges of conspiracy to commit securities fraud, according to an affidavit unsealed Wednesday in support of a criminal complaint.
U.S. Magistrate Wallace Dixon set their bail at $50,000 each during a hearing in downtown Charleston.
The James Island residents aren't allowed to trade or promote any stocks, Dixon said. Also, their travel is restricted to South Carolina and Massachusetts, where the case will be prosecuted.
The alleged fraud took place between August 2012 and February 2014, and centered on a small Boston-based startup called Amogear Inc. Its stock has the symbol AMOG, but the shares aren't listed on a major exchange.
An unidentified cooperating witness who's seeking leniency in a similar case worked with the FBI, as did an undercover agent who briefly posed as the CEO of Amogear.
The business was described as a new clothing brand aiming to capitalize on the mixed-martial arts craze.
"The company plans to grow its existing product line consisting of athletic gear that will target MMA fans and those who live an active lifestyle," Amogear said in a news release this year.
It wasn't true, according to the FBI.
"While Amogear purports to be a sports apparel company, it is actually a shell company that was acquired and controlled by the FBI through a cooperating witness ... as part of an FBI undercover operation," Special Agent S. Vincent M. Chambers of the Boston field office said in an affidavit that was unsealed Wednesday.
He said the Charleston promoters orchestrated what is known in the investment business as a "pump and dump."
Typically, the Internet-based schemes involve the widespread release of false or misleading information about a company to inflate or "pump" the stock price.
The organizers and their associates then "dump," or sell their shares at a profit.
Chambers said Nix, Putnam, the FBI undercover agent and the cooperating witness, who had purchased all of Amogear's dormant stock in 2012, met in Boston to discuss the scheme in August 2012.
It wasn't until Feb. 9 and 10 of this year that several websites controlled by Nix and Putnam sent out the first "blast" promotional emails touting the stock, according to the affidavit.
The Securities and Exchange Commission halted trading in Amogear's shares on Feb 10.
In arguing for more lenient bail terms, defense attorney Stephen Harris said neither Nix nor Putnam profited from the alleged fraud.
Editor's note: Previous versions of this story contained the incorrect bail amount.