Sky fraud probed by UK site

SKY CAPITAL Holdings, the brokerage at the centre of a $140m (&pound;87.2m) &ldquo;boiler room&rdquo; investigation, threatened to sue a city website that was investigating its operations, a City source told City A.M. yesterday.<br /><br />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.<br /><br />Six former employees of the firm, including its founder &ndash; self-styled &ldquo;bad boy of Wall Street&rdquo; &ndash; 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.<br /><br />City A.M. learned yesterday that a prominent City news website commissioned a private investigator to look into the firm&rsquo;s activities in 2005, but was forced to drop the enquiries after Sky threatened it with a sizeable law suit.<br /><br />However, after a three-year long Federal investigation, the six are now charged with fraud and share price manipulation.<br /><br />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.<br /><br />The prosecutor says that they then enforced a &ldquo;no net sales&rdquo; policy which prevented clients from selling those holdings for a year &ndash; thus maintaining an artificially high share price &ndash; and used the cash to enrich their own lifestyles and pay commissions to the firm&rsquo;s brokers.<br /><br />Mandell and the five other employees charged all surrendered to FBI agents on Wednesday morning.<br /><br />The US Securities and Exchange Commission (SEC) has also filed a civil complaint against the six.