An Ohio investment fund manager who used accounts at Baltimore brokerage Ferris Baker Watts to carry out a stock manipulation scheme was sentenced to 13 years in federal prison yesterday.
David A. Dadante pleaded guilty in August to two counts of securities fraud. Dadante's broker at Ferris, Stephen J. Glantz, was sentenced to 33 months Thursday for aiding the fraud. A second broker, from the Connecticut-based Advest Group, was charged with securities fraud in the case Wednesday. All three men were charged in U.S. District Court in Cleveland.
More than 100 investors in Dadante's IPOF fund lost $28 million in what started out as a Ponzi scheme - in which money from new investors is used to pay "returns" to existing investors. The scheme grew into a market fraud that drew investigators' attention to his trading through Ferris and several other brokerage firms.
Dadante used much of the money to finance a luxury home in the Cleveland suburbs and gambling junkets to Las Vegas, according to court records. His sentence included repaying investors for their losses, though there is little left of his assets to cover the debt. He remains free on bond.
Court records say Dadante collected nearly $50 million from IPOF investors and used some of the proceeds to amass a nearly 35 percent stake in Duluth, Ga.-based Innotrac Corp., a thinly traded company with a history of losses. Dadante has testified that Glantz initially suggested Innotrac as an investment and introduced him to company officials.
Over the course of about two years beginning in August 2002, Dadante and Glantz engaged in illegal trades designed to artificially raise Innotrac's share price. Most of the trading was done through Ferris' trading desk. The Securities and Exchange Commission is investigating the century-old brokerage's handling of the matter.
At yesterday's sentencing, Mark Stanton, Dadante's attorney, told the judge that Dadante had no experience trading stocks and that his broker at Ferris guided him along.
"He didn't get into this on his own," Stanton said in a phone interview after the hearing. "He didn't know Innotrac from Krispy Kreme."