SAN DIEGO – A local federal court recently ruled in favor of acquitting two businessmen, Jonathan Destler, 61, of Los Angeles, and Robert Lazerus, 68, of Solana Beach, accused in connection with a securities fraud case involving alleged market manipulation tactics. U.S. District Judge Cynthia Bashant dismissed all charges against the pair, raising significant doubts about the sufficiency of evidence presented by prosecutors.
The charges stemmed from accusations that Destler, Lazerus, and two others were involved in a sophisticated “pump-and-dump” scheme aimed at inflating the stock value of Loop Industries, a Canadian-based company claiming to have innovative plastic recycling technology. According to the indictment, after artificially boosting the stock price, the accused sold their shares at a profit, defrauding unwitting investors.
However, during a Dec. 2 hearing, Bashant criticized the government’s case, highlighting the lack of compelling proof and a clear victim of fraud. The decision to acquit followed a previous jury deadlock, which ended in an 8-4 split favoring the acquittal of the defendants earlier this year.
Prosecutors had argued that the defendants, along with others, engaged in illegal maneuvers including a reverse merger to list Loop Industries publicly, circumventing the traditional initial public offering process. They alleged this strategy involved tightly controlling the majority of the company’s stocks to manipulate its market price and ultimately uplift it to a NASDAQ listing in November 2017. However, the judge found nothing illicit about the reverse merger itself or the strategies purportedly used by the defendants to control the stock.
The use of judgment of acquittal under federal rules was pivotal in this case. It allows for dismissal when evidence presented by the prosecution fails to meet the threshold necessary to sustain a conviction. In her ruling, Bashant stated that while there were questionable transactions and signs of possible nefarious activities, it did not necessarily equate to guilt beyond a reasonable doubt for Destler and Lazerus.
In contrast, the evidence against another defendant, Donald Danks, 67, of Newport Beach, was deemed substantial enough to possibly lead to a conviction. His request for dismissal was denied, and a new trial date was set for June. Meanwhile, David Stephens, 68, the fourth and Canadian defendant, has yet to be extradited to face charges.
Legal representatives for Destler and Lazerus expressed relief and gratitude following the favorable court ruling. They argued that their clients were wrongly implicated in a non-existent grand scheme and that the prosecution had only pieced together unconnected events to fabricate a misleading narrative of fraud.
The case has highlighted challenges in prosecuting complex financial crimes, where the interplay between unusual business strategies and outright illegal activities can often blur lines, making it difficult for juries and courts to reach conclusions.
No comments were provided by the U.S. Attorney’s Office in San Diego regarding the dismissal or their next steps concerning the remaining defendants.
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