Sky Capital executives face fraud charges

9 July 2009

Six former executives at a New York-based brokerage have been charged with carrying out a $140 million 'boiler room' fraud.

US authorities have alleged that the Sky Capital brokers - including founder and chief executive Ross Mandell - convinced investors to purchase shares in the company, which were then used to fund lavish lifestyles.

These shares were effectively worthless, the Securities and Exchange Commission alleged, as the company is said to have operated a policy whereby it was "nearly impossible" to sell stock once it had been purchased.

"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," acting director of the SEC James Clarkson stated.

Mr Mandell could face up to 25 years in prison if he is found guilty of the charges.

The FBI recently warned of increased instances of mortgage-related fraud in the US, citing growing foreclosure numbers and the economic downturn as reasons for the rise.

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