New Haven Independent

New Haven Savings Bank, a mutual savings bank, went public in 2004 and became NewAlliance Bank. In such public offerings, bank depositors get to buy the first batch of stock in an initial public offering (IPO). That stock almost always immediately shoots way up in the value when the rest of the public gets to start buying.

So a scam often takes place in these public offerings. Out-of-town investors look for depositors of the local bank going public. They give the depositors hundreds of thousands, or millions, of dollars to buy stock in the IPO. Then they resell the stock soon after, when the stock price shoots up. They can pocket 50 percent or more in profit for a day’s work. Then they split the profits.

It’s not legal. But it’s a rampant practice. Because the feds practically never investigate the crime. Even when they do, the cases are hard to prove.

But something different happened in New Haven. Alerted to the scam here by these two articles, the U.S. Attorney’s Office and the SEC launched investigations. And they caught up with some scammers.

The U.S. Attorney’s Office won indictments against two alleged scammers last October.

And now come the two new cases, civil fraud charges filed in U.S. District Court on Tuesday. They involve two sets of alleged scams, one involving an investor from Darien, Conn., the other a group from Boca Raton, Fla., Weymouth, Mass., and West Palm Beach Fla. The SEC announced that it has partially settled the cases. In addition to paying back their ill-gotten gains, the people involved agreed to pay fines of $120,000, $25,885, and $170,962.

Click here for the government’s press release. Click here and here for all the details of the government’s case from the complaints filed against the alleged scammers.

The greedfest known as the New Haven Savings demutualization may have taken place more than two years ago. But more scammers may still be in the feds’ sights. The SEC said its investigation is continuing.