Feds Bust 10 in Securities Kickback Scheme

BROOKLYN (CN) — The feds threw another book at investors behind a Nevada company accused of running a kickback investment scheme to net $131 million.

The Securities and Exchange Commission filed its suit in Brooklyn Federal Court on Tuesday.

The 10 named defendants are accused of running at least three schemes to defraud investors in ForceField Energy, a Reno-based based company registered to trade on NASDAQ since as early as 2012.

The first scam was "orchestrated" by ForceField's ex-chairman, defendant Richard St. Julien, in 2014, according to the commission. The feds say he hired defendant Jared Mitchell, a "purported 'investor relations' professional, to pay cash kickbacks to the registered representative defendants in return for their recommending and purchasing ForceField stock in their customers' accounts."

A second scheme, started in 2012, involved St. Julien giving kickbacks to defendant Christopher F. Castaldo, a man who the lawsuit says was found liable by a jury in 2009 for violating federal securities laws.

Castaldo then went about soliciting investors but never told anyone that he was getting 10 percent for the stock he brought in, the SEC says.

Authorities say in the third scheme, from 2009 to 2015, St. Julien paid Herschel C. Knippa and Louis F. Petrossi kickbacks "in exchange for their successfully soliciting investments in ForceField's private placements of private stock and warrants."

"In each of these three schemes, St. Julien and the other defendants tried to conceal their illegal conduct by, among other things, having St. Julien pay most of the kickbacks through an offshore nominee he controlled," according to the complaint.

Others even went so far as to communicate on prepaid disposable cellphones, and used "encrypted, content-expiring messaging apps" to communicate, the lawsuit states.

The suit comes the same day the U.S Department of Justice trumpeted in a statement that nine people were indicted for orchestrating the "market manipulation scheme."

The five-count indictment was unsealed Tuesday in Brooklyn Federal Court.

The laundry list of charges against the defendants include securities fraud, conspiracy to commit securities fraud, wire fraud, money laundering and making a false statement to law enforcement officials, according to the DOJ's statement.

Mitchell, 34, Richard L. Brown, 37, Castaldo, 44, and Naveed Khan, 33, were already arraigned Tuesday morning before U.S. Magistrate Judge Vera M. Scanlon in Brooklyn.

Gerald (aka Gerry) Cocuzzo, 37, and and Mayoof Miyana, 35, have sought to remove the complaints against them, authorities said.

Pranav Pate, 35, is poised to remove the case against him in a federal courthouse in Florida Tuesday. Knippa, 45, will do the same in a Texas courtroom, as will Petrossi,75, in Nevada, authorities said.

"The defendants and their network of registered brokers and stock promoters designed an elaborate but fraudulent scheme built on lies, kickbacks and manipulated trading activity to defraud the securities markets, the investing public and their clients," U.S. Attorney Robert Capers said.

"They took a company and their clients into believing it was worth hundreds of millions of dollars through a dizzying round of unauthorized trades and deceptive promotions."

The DOJ dropped several names in its news release this morning: Mitchell was a managing partner of Mitchell & Sullivan Capital; Castaldo was the CEO of Stock Traders Press and president of Wall Street Buy Sell Hold; Brown, Cocuzzo, Khan, Miyana and Patel were registered brokers; Knippa owned Head Trader at Kenai Capital Management.

Petrossi is the founder and CEO of the Wealth Research Institute.

Efforts to track down contact information for ForceField were unsuccessful. The filing attorney, Andrew Calamari, did not respond to a phone call or email Tuesday.

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