This summer, Sky Capital Holdings founder Ross Mandell was convicted by a federal jury of mail fraud, wire fraud, conspiracy and securities fraud after operating what prosecutors claimed was a scheme that defrauded investors of $140 million over an eight year period.
Federal prosecutors argued that Mandell and others at Sky Capital manipulated shares in two companies the firm owned that were traded on the London Stock Exchange. They were also accused of using false information in persuading clients to invest in private placements that promised large returns. Further, prosecutors claimed that Mandell and his associates misused client funds by paying themselves excessive commissions, funding lavish personal expenses such as private jets and expensive Swiss watches, and paying off victims who had lost money in false investment opportunities.
Mandell remains free on bond pending his sentencing, but he still faces a potential life sentence based on federal sentencing guidelines.
Securities fraud involves deliberate, fraudulent activities by financial advisors, brokers and others in positions of authority to harm investors while bringing profit to themselves. Rule 10b-5 of the Securities Exchange Act prohibits brokers and investment firms from any using "manipulative or deceptive device or contrivance" in connection with the purchase or sale of any security. Essentially, a person who communicates false information about a stock or security in persuading someone to invest can be prosecuted.
Securities fraud is not limited to broker statements to potential investors. It can also include false information on corporate financial statements, misleading statements to the Securities Exchange Commission, as well as stock manipulation schemes. As such, efforts to artificially inflate a security's value or to deceptively minimize the risk of an investment can be considered securities fraud. The common denominator in each of these activities is that the investor loses money after relying on statements about investment opportunities.
If you have been accused of or are under investigation for securities fraud, contact an experienced criminal defense attorney.