Exec, owner of Simi Valley company charged with 'pump and dump' securities fraud

Two executives of a Simi Valley company were indicted last week on securities fraud charges, accused of a “pump-and-dump” scheme to secretly amass shares in the company and sell them at prices inflated by a false advertising campaign.

Kalistratos “Kelly” Kabilafkas, 48, and Jack Edward Daniels, 74, each face one count of conspiracy and one count of securities fraud for their roles in running Airborne Wireless Network. A federal grand jury indicted both men last week, but the indictment was kept under seal until Monday, when Kabilafkas made his first appearance in court in Los Angeles.

Kabilafkas is a Moorpark resident and Daniels now lives in Agoura Hills. Daniels was listed as the president and a director of Airborne Wireless, but Kabilafkas actually controlled the company, despite not having an official position there, according to both the criminal indictment and a lawsuit filed by the U.S. Securities and Exchange Commission against the company and its executives in 2021.

The SEC won that lawsuit last year, when a judge ordered Kabilafkas to pay the federal agency $78 million, including $45 million in ill-gotten profits, plus interest and penalties. Daniels was ordered to pay a penalty of $230,000. Kabilafkas, Daniels and the other defendants have appealed the decision.

If they are convicted of the criminal charges brought against them last week, Kabilafkas and Daniels could be sentenced to as much as five years in prison for conspiracy and 20 years for securities fraud, according to a news release from the U.S. Attorney’s Office in Los Angeles. The indictment also lists five residential properties in Moorpark owned by Kabilafkas or Daniels that they would forfeit if convicted.

Kabilafkas pleaded not guilty on Monday and a judge set his trail date for June 24. He is being held on $800,000 bail, and has a hearing scheduled to determine whether he will be held without bail. Daniels is not in custody and has an arraignment scheduled for Friday.

In an email to The Star, Kabilafkas’ attorney, Matthew Ford, said he and his client are “somewhat baffled by these charges, which seek to impose criminal sanctions on Mr. Kabilafkas because a start-up business failed. We plan to vigorously defend against them and look forward to re-establishing his good standing in the community.”

Airborne Wireless Network was based in Simi Valley and said it would deliver high-speed internet access by using routers on commercial aircraft to form a satellite network. The product never made it to market and the company racked up more than $130 million in losses between 2015 and 2019, according to its last quarterly report with the SEC , filed in 2019.

The federal criminal and civic actions against Airborne Wireless claim that the company's real purpose was not to develop the technology, but to promote it, causing its stock price to rise and allowing Kabilafkas and a few others to profit at the expense of new investors.

The Airborne Wireless saga began in 2012, when a company called Ample-Tee registered with the SEC to sell its shares to the public. Ample-Tee was a shell company, with no products or offices, founded the year before with the stated purpose of acquiring a patent for a crutch designed for people with below-the-knee leg amputations.

According to the grand jury indictment, one of Kabilafkas’ associates stole the identity of Ample-Tee’s founder to incorporate the company in Nevada and register its stock with the SEC. In 2015, Ample-Tee told the SEC that Daniels had bought 74% of the company’s shares and was now its president, using $250,000 of his own funds.

In fact, according to the indictment and the SEC lawsuit, the real buyer was Kabilafkas, who acquired all of the shares using $350,000 that he misappropriated from a charitable religious organization. The charity was not named in the indictment, but one of the defendants in the SEC’s lawsuit was a rabbi who runs a Jewish boarding school for girls in Florida.

Story continues below the indictment.

With Kabilafkas in control, the company changed its name to Airborne Wireless Network in 2016 and announced its new business plan: broadband beamed to the earth from commercial airplanes.

That year, the company bought a patent for the technology from a company called Apcentive, paying with shares of Airborne Wireless stock. At the time, Kabilafkas and his associates controlled Apcentive and had acquired the patent a year earlier. According to the indictment, the patent was “a promotional gimmick and a device to defraud investors to buy Apcentive stock.”

Once Ample-Tee had become Airborne Wireless, it spent millions to publicize itself and its technology, using what the SEC called “false and misleading statements about the company.”

Airborne Wireless paid companies to promote its stock, and they issued mass-marketing emails touting the company to potential investors and claiming it was on the verge of, in the words of one marketing email, a “major technical breakout.”

Airborne also bought cable news advertising spots on CNBC, Fox Business and Fox News from late 2016 through early 2018. The company had no product for sale, and the goal of the ads was simply to pump up demand for the stock, according to the indictment.

Airborne’s stock price would spike every time the cable ads ran, and, according to the indictment, Kabilafkas and his associates would capitalize on those spikes by selling shares — the “dump” half of the “pump and dump.” Between 2015 and 2018, they sold shares at a profit of more than $22 million, while the company raised another $23 million through private and public stock offerings, according to the SEC’s lawsuit.

Airborne Wireless’ value peaked at $4.07 per share in February 2017, in the midst of its marketing blitz. By the fall of 2018, it was worth less than a penny per share.

Tony Biasotti is an investigative and watchdog reporter for the Ventura County Star. Reach him at tbiasotti@vcstar.com . This story was made possible by a grant from the Ventura County Community Foundation's Fund to Support Local Journalism.

This article originally appeared on Ventura County Star: Exec, owner of Simi Valley company charged with 'pump and dump' securities fraud