Wall Street Brokers Charged in $140 Million Investment Scam

Bernard Madoff is behind bars, but on Wall Street, the beat goes on.

Federal authorities said today they have arrested six employees of Sky Capital, a Wall Street retail brokerage house, on charges of running a $140 million “transatlantic boiler room” that ripped off investors across the United States and Great Britain.

Brokers raised $61 million between 2002 and 2006 by selling shares of company stock without telling investors about restrictions on how those shares could later be sold, according to the Securities and Exchange Commission. For instance, investors were not told that a company policy prohibited them from selling their Sky Capital Holdings Ltd and Sky Capital Enterprises Inc.

“Customers were not told that they would be unable to sell their shares, and the no net sales policy helped artificially inflate the price of the Sky Entities stocks,” the SEC said in announcing criminal indictments. “When trading in those stocks was suspended by the London Stock Exchange in 2006, the investments were rendered worthless.”

Working under two securities broker-dealers, The Thornwater Company LP and Sky Capital LLC, the defendants reportedly raised $140 million for the scheme between 1998 and 2006, prosecutors said.

Arrested and charged today were Sky Capital President and Chief Executive Officer Ross Mandell, 52, of Boca Raton, Fla.; former Chief Operating Officer Stephen Shea, 37, of New York; Adam Harrington, 39, of Miami; Arn Wilson, 52, of Concord, North Carolina; Robert Grabowski, 41, of New York; and Michael Passaro, 46, of Delray Beach, Florida, authorities said.

The defendants are charged with securities, wire, and mail fraud charges. They were taken into custody today.

Prosecutors accuse Mandell and his associates of defrauding investors in what was essentially a Ponzi scheme.

“Investor funds were substantially used to enrich the defendants and others; to pay excessive undisclosed commissions to brokers and to pay off victims who had lost money through prior purported investment opportunities,” the Office of the U.S. Attorney in Manhattan said in a statement.

No related posts.