Michael Morris, Market Manipulation, New York 2023

In a shocking turn of events, Michael Morris, the former Managing Director of Halcyon Cabot Partners, Ltd., has pleaded guilty to participating in an $86 million market manipulation scheme involving CodeSmart Holdings, Inc.

According to court documents, Morris and his co-conspirators orchestrated a reverse merger of CodeSmart, a private company, with a public shell company in early May 2013. The scheme, known as a ‘pump and dump,’ involved inflating CodeSmart’s share price and trading volume before selling their shares at a profit.

The first pump and dump occurred between approximately May 13, 2013, and August 21, 2013, where Morris’s co-conspirators manipulated CodeSmart’s stock price by raising it from $1.77 to a high of $6.94, before causing it to drop to $2.19.

The second pump and dump occurred between approximately August 21, 2013, and September 20, 2013, where Morris and his co-conspirators manipulated CodeSmart’s stock price by raising it from $2.19 to a high of $4.60, before causing it to drop to $2.13.

On July 12, 2013, when CodeSmart’s inflated share price was at its highest, CodeSmart’s market capitalization was $86,347,800. However, that same day, CodeSmart filed with the U.S. Securities and Exchange Commission an amended Form 10-K, in which it listed only $6,000 in total assets, $7,600 in revenue, and a net loss of $103,141.

Morris faces a maximum of five years in prison when sentenced. The case is being handled by the Office’s Business and Securities Fraud Section, with Assistant United States Attorneys Shannon C. Jones, Patrick T. Hein, and Mark Bini leading the prosecution.

The Defendant, Michael Morris, is a 65-year-old resident of Merrick, New York, and was charged in the Eastern District of New York with conspiracy to commit securities fraud.

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