The Securities and Exchange Commission today charged New York-based broker-dealer Sky Capital LLC and six individuals involved in a fraudulent boiler room scheme that raised millions of dollars from U.S. and UK investors who were then restricted from selling their stock, and their investments later became worthless.
The SEC alleges that the firm's founder, president and CEO Ross Mandell directed Sky Capital brokers to make material misrepresentations, omit material information, and use high-pressure sales tactics to induce customers to purchase stock in two related companies — Sky Capital Holdings Ltd. and Sky Capital Enterprises, Inc. (Sky Entities). Sky Capital brokers used scripts to solicit investors for the private placements, and based their sales pitches on what Mandell told them. The brokers enjoyed hefty undisclosed commissions and other perks, and Mandell used investor funds to subsidize his own lifestyle including expensive travel and hotels, adult entertainment, and child care expenses.
"Boiler room tactics like those used by Sky Capital and its brokers undercut the level of honesty and fair play we seek to maintain in the securities markets," said James Clarkson, Acting Director of the SEC's New York Regional Office. "This firm and these brokers went to great lengths to repeatedly lie to investors, pressuring them into buying stock without telling them it would be nearly impossible to sell those shares."
In addition to Sky Capital and Mandell, who resides in Boca Raton, Fla., the SEC's complaint charges the firm's former chief operating officer Stephen Shea of Brooklyn and four former registered representatives at the firm: Robert Grabowski of Staten Island, Adam Harrington (a/k/a Adam Rukdeschel) of Miami, Fla., Michael Passaro of Delray Beach, Fla., and Arn Wilson of Concord, N.C. Sky Capital is also known as Granta Capital LLC.
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