(Reuters) - The former chief executive of defunct brokerage Sky Capital LLC was sentenced on Thursday in a Manhattan federal court to 12 years in prison for defrauding investors, Manhattan U.S. attorney Preet Bharara said.
Last year, Ross Mandell and former Sky broker Adam Harrington were each convicted by a Manhattan federal jury of securities fraud, wire fraud and mail fraud, as well as conspiracy to commit each of these offenses.
Investigators termed the case a "boiler room" scheme, which refers to high-pressure sales, usually by telephone, of stocks or other assets that are often worthless or of dubious value.
The defendants raised more than $50 million from investors in connection with the scheme and the court ordered Mandell to forfeit the money, Bharara said in a statement.
"For nearly a decade, Ross Mandell continuously lied, and directed his brokers to lie to investors, convincing them to make investments that Mandell knew were not what was promised," Bharara said.
Prosecutors had accused Mandell and Harrington of soliciting investors, mainly in the United States and United Kingdom, through cold calls and high-pressure sales tactics to invest in two Sky entities, promising that their prices would rise "dramatically" because of imminent "liquidity" events, such as initial public offerings or acquisitions.
The defendants were accused of diverting investor funds, enriching themselves and paying undisclosed commissions to brokers. The indictment said the men inflated Sky's stock prices through a variety of means, including refusing to let some investors sell their stock.
The scheme ran from 1998 to 2006, and involved Sky Capital and its predecessor, Thornwater Co, prosecutors said at the trial.
In addition to his prison term, Mandell, of Boca Raton, Florida, was sentenced to three years of supervised release. Harrington is due to be sentenced on Friday.
The case is U.S. v. Mandell et al, U.S. District Court, Southern District of New York, Case No. 09-00662
(Reporting by Sakthi Prasad; Editing by Richard Pullin)