Sky fraud probed by UK site
SKY CAPITAL Holdings, the brokerage at the centre of a $140m (£87.2m) “boiler room” investigation, threatened to sue a city website that was investigating its operations, a City source told City PM yesterday.
The news came as it emerged that as many as 400 UK retail investors may have been duped out of their money by the AIM-listed company.
Six former employees of the firm, including its founder – self-styled “bad boy of Wall Street” – Ross Mandell, were arrested by the FBI in New York on Wednesday and have been charged with defrauding investors on both sides of the Atlantic between 1998 and 2006.
City PM learned yesterday that a prominent City news website commissioned a private investigator to look into the firm’s activities in 2005, but was forced to drop the enquiries after Sky threatened it with a sizeable law suit.
However, after a three-year long Federal investigation, the six are now charged with fraud and share price manipulation.
They are alleged to have advised their existing retail clients to buy newly issued shares in Sky Capital Holdings, a subsidiary of US-based Sky Capital Group.
The prosecutor says that they then enforced a “no net sales” policy which prevented clients from selling those holdings for a year – thus maintaining an artificially high share price – and used the cash to enrich their own lifestyles and pay commissions to the firm’s brokers.
Mandell and the five other employees charged all surrendered to FBI agents on Wednesday morning.
The US Securities and Exchange Commission (SEC) has also filed a civil complaint against the six.