Sky Capital six in fraud charge

City A.M. Reporter
<div>SIX former employees of Wall Street retail brokerage Sky Capital were yesterday charged with running a $140m (&pound;87.2m) &ldquo;trans-Atlantic boiler room&rdquo; to defraud investors in both the US and the UK.<br /><br />US prosecutors announced a criminal indictment of fraud against Sky Capital&rsquo;s founder and chief&nbsp;executive Ross Mandell and five others, while the Securities and Exchange Commission (SEC) filed a civil complaint.<br /><br />The six are charged with advising investors to buy shares in two then Aim-list companies, Sky Capital Holdings and Sky Capital Enterprises. They allegedly then enforced a policy that prevented them from selling those holdings, and used the cash to enrich their own lifestyles and pay commissions to the firm&rsquo;s brokers, often disguised as bonuses or loans.<br /><br />&ldquo;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,&rdquo; the SEC said. &ldquo;When trading in those stocks was suspended by the London Stock Exchange in 2006, the investments were rendered worthless.&rdquo;<br /><br />Mandell and the five other employees charged all surrendered to FBI agents yesterday morning.<br /><br />&ldquo;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,&rdquo; the US Attorney in Manhattan said in a statement. It added that the defendants acted primarily from two successive securities broker-dealers, The Thornwater Company and Sky Capital, raising some $140m for the scheme between 1998 and 2006.</div>