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The Twisted and Deadly Story Behind the Neuromama Stock Scheme

As stock schemes go, you could say Neuromama’s was hiding in plain sight.

By the time the Securities and Exchange Commission suspended trading in the stock on Wednesday, its shares—which only traded on the over-the-counter market typically reserved for penny stocks—had exploded 330% this year to more than $56 each. The company’s market value swelled to more than $35 billion, zooming past that of Tesla (TSLA) and not far behind the $42 billion for Netflix (NFLX). Neuromama, which claims it’s developing a new kind of neural search engine (“NeuroMama is Google…. before Google became Google,” according to a company document), doesn’t even have any revenue.

The SEC was concerned, for one, that “the identity of the persons in control of the company” might not be what the market thought it was. And it’s not hard to see why.

While Neuromama’s management team hails from the capital city of Siberia, Novosibirsk, where the company was originally based, the man pulling the strings is a serial fraudster masquerading under an alias and living in exile in Mexico. In a case that sent him to jail a decade ago, a San Diego district judge concluded, “He is in fact a danger to the community.”

A Man of Multiple Monikers

That man is Vladislav “Steven” Zubkis, who now goes by Steven Schwartzbard at Neuromama, and who was forced to leave the U.S. after serving more than five years in prison for defrauding investors and money laundering in two separate schemes. A native of Russia-controlled Ukraine, Zubkis says he considers himself “still the citizen of Soviet Union.” He’s such a veteran troublemaker that the New York Times noted way back in 1997 that he already had “an extensive regulatory rap sheet.” Since then, Zubkis was permanently banned from serving as a director or officer of a public company, associating with a broker-dealer or participating in an offering of penny stock—not that it’s slowed him down much.

Zubkis doesn’t dispute any of that. In fact, he catalogs his saga at length online, both on personal websites (one for each of his names), and in a 68-page manifesto of sorts that’s posted in the fine print at the very bottom of Neuromama’s investor relations website. “I am sure that a lot of people reading this document may have a question, is Vladislav Zubkis aka Steven Schwartzbard can be trusted [sic]?” he writes in the disclosure.

http://www.youtube.com/watch?v=N5Fpb3127YY

If anything, Zubkis seems to wear some of his transgressions as a badge of pride. “I do readily admit that one part is true… I was once a Wall Street ‘bad boy’,” he tells Fortune in a lengthy email. “At one time, I even had the dubious distinction of being the second most heavily fined scofflaw in SEC history (#1 was Michael Milken).” (Milken also was banned from the securities industry in the 1990s and spent nearly two years in prison.) In the email, Zubkis also refers to himself as an “all-too-typical stock pimp.”

But even then it takes a bit of detective work to unearth Zubkis’ true influence at Neuromama. Although his official role there—under the Schwartzbard pseudonym—is General Design and Marketing Strategist, his involvement goes well beyond that, as he controls shell companies that function as both Neuromama’s advisory board and its financier. “One thing I’ve learned about being a consultant though, is that you eventually wind up with your fingers in all the pots,” he admits.

Last year, Zubkis’ 20-year-old daughter Victoria was found dead in the ocean off the coast of San Diego (he’s sure she was murdered, but the police did not suspect foul play). Another of his daughters was nearly killed when she was stabbed by a mystery attacker at age two in 1999, according to Bloomberg. In 2014, Zubkis was arrested in Tijuana in Mexico on suspicion of leading a mafia ring involved in drug and weapons trafficking, which he denied. He later was released and says he was “arrested due to mistake.”

Can’t Sit Still

Neuromama itself has also been on the run. Incorporated in Las Vegas in 2011, the company moved its headquarters from Siberia to Rosarito Beach, Mexico—about 10 miles south of the U.S. border—in 2014. “It was politically incorrect for Neuromama to remain in Russia,” Zubkis says, explaining that the decision was in the best interest of shareholders.

But the multiple locations created a “record-keeping train wreck,” Zubkis admits. Soon after the relocation, Neuromama’s accountants abruptly resigned while auditing the company.

And Zubkis’ dealings with Neuromama appear to skirt U.S. securities regulations, if not outright violate them.

In accordance with SEC prohibitions, Zubkis insists that he is not actually an officer or director of Neuromama. But he is chairman of Neuromama’s advisory board, led by an entity he founded called the Amnistya Childrens Foundation. Alhough it sounds like a charity, it’s actually an affiliate (“a social outreach service”) of Eurasia, a real estate project in Mexico with which Zubkis is involved. The parent company of Eurasia is Global Financial Trust, another Zubkis company that provided Neuromama’s financing. Zubkis says he will receive more than 2 billion shares of Neuromama in exchange for Amnistya providing the company with various advisory services. Most of the other 35 members of Neuromama’s advisory board are listed primarily as “Slava’s friend” (using Zubkis’ nickname for Vladislav) in their bios. Neuromama’s actual board of directors, on the other hand, consists of just two people: its CEO and CFO.

Documents posted directly on Neuromama’s website also include emails Zubkis sent in May on behalf of Global Financial Trust, soliciting investors for an offering of Neuromama stock, instructing them to send checks via FedEx—one directly to the company and one made out to a division of Global Financial. In one email, he suggests investors cash out part of their 401K retirement account to fund the transaction. In other, he promises that “in October of this year you’ll [sic] should get at least $50.00 to $100.00 for every invested dollar.”

While the layers of shell companies—not to mention the pseudonym—help disguise Neuromama’s connection to Zubkis, he maintains that he’s tried to be fully transparent. “I am not hiding my past from anyone. I am not violating any SEC law or any limitations imposed by SEC on me,” he tells Fortune. “My involvement is, and always has been fully disclosed.” Indeed, he says his proudest achievement at Neuromama is crafting the disclosure statement on its website. Still, the 68-page document detailing his history was never filed with the SEC, nor were either of his names ever mentioned in Neuromama’s other regulatory filings.

Rather than dialing back the stock hype, Zubkis seems more committed to justifying his approach for “making money as fast as possible.” Neuromama’s rainbow-colored investor website proclaims it a “hot stock” and a “super stock,” illustrated with stacks of cash and icons of wealthy entrepreneurs like Facebook (FB) CEO Mark Zuckerberg and Alibaba (BABA) founder Jack Ma.

“If your main goal to make money in a market, and you…don’t care if the cab driver has gotten a lot of tickets by the time he learned his way around,” Zubkis writes in the disclosure, then Neuromama is the stock for you.

Figuring Fraud

Zubkis has no “formal education,” he says, but his “mentors and teachers” include Frank “Front Page Franky” Balfour, whom he describes as “one of the most experienced stock promoters in Canada.” Balfour was banned in the 1990s by that country’s regulators from trading securities for 25 years.

Of course, the most common kind of stock promotion fraud is what’s known as a “pump-and-dump scheme,” whereby shareholders try to entice other investors to bid up the stock price by touting false or misleading claims about the company, only to offload their shares at an inflated price before the unwitting buyers realize their mistake. It’s not clear, however, that Zubkis is playing that game: He claims he doesn’t own any Neuromama stock (he hasn’t earned the two billion shares yet), and he did not answer questions about how much money he has made on the company.

As for who has been bidding up the price of the stock, it’s another mystery; Zubkis says the firm’s largest shareholders are a group of Europeans who invested in a predecessor shell company before it became Neuromama, and he attributes the stock movement to interest in technology and Neuromama’s actual business. In his past schemes, though, Zubkis has profited handsomely: The SEC originally fined him about $21.6 million in 2001 (of which less than $2 million has been collected, although the SEC did seize Zubkis’ 75-foot luxury yacht in 2003).

http://www.youtube.com/watch?v=ok-8uVR4Pa0

For now, Zubkis is standing by Neuromama’s intentions to soon seek a listing on the regular Nasdaq stock exchange, although he denies spreading false rumors that the company already had an application pending—one of the SEC’s allegations in halting Neuromama’s stock.

“I am not paranoid, not mega-paranoid anyway, and I am not making this up,” Zubkis tells Fortune.

As for investors and regulators, however, a little more paranoia next time wouldn’t hurt.