SHERMAN, Texas (CN) - The former right-hand man of the "Wolf of Wall Street" is selling stock consulting services despite being "blacklisted" from the securities industry, a Texas company claims in court.
Oxysure Systems sued Wall Street Buy Sell Hold Inc., Christopher Castaldo and his brother Jerry Castaldo on May 8 in Federal Court.
Oxysure, which makes emergency oxygen devices, signed a consulting contract with Wall Street Buy Sell Hold (WSBSH) to improve its share price and attract investors, unaware that Chris Castaldo, an unlicensed and often-sued securities broker, owned the company, Oxysure's attorney Mazin Sbaiti said.
The Dallas-area company sells portable devices that "create pure, medical-grade oxygen when two dry and inert powders are mixed via a patented actuation mechanism." The devices are put in hospitals and schools for emergencies, like fire extinguishers and defibrillators, Oxysure says in the lawsuit.
Chris Castaldo saw Oxysure's stock in the pink sheets, a market for stocks that are not regulated by the SEC, and sent it ads for his company WSBSH, Sbaiti said in an interview.
"The parties entered into two written agreements ... whereby Oxysure retained WSBSH to act in a consulting and advisory capacity in order to improve Oxysure's stock price, trading volume, and investor activity," the lawsuit states.
Oxysure says it did not know the SEC had won multiple judgments against Castaldo; that Georgia and New Mexico had barred him from selling securities in their states; or that he cut his teeth working for Stratton Oakmont, a boiler room run by convicted securities fraudster Jordan Belfort, who served four years in federal prison and whose book "The Wolf of Wall Street" inspired the Leonardo DiCaprio and Martin Scorsese film of the same name.
Oxysure says WSBSH and Castaldo talked a good game but "did not perform" under the contracts.
"Castaldo purported to have located a 'BIG client in Dallas', who was 'VERY interested in making a substantial investment.' This deal never came to fruition," the complaint states.
Asked if Oxysure were to blame for not looking into Castaldo's background, Sbaiti was incredulous.
"That's something Castaldo should bring up," the attorney said. "You shouldn't have to do a criminal background check on every person you're doing business with who represents themselves as being a legitimate business person. Otherwise you'd say that about everything. Right?
"Somebody lies to you and they go, 'Well, you should have known. You should have known I was a liar. You should have investigated me.' It would bring the economy to a halt."
Sbaiti said he didn't start looking into Castaldo's background until WSBSH sued Oxysure in Long Island in 2013, seeking payment for its consulting services.
Everything Castaldo is doing is illegal, Oxysure claims, because neither he nor his business nor any of its employees holds a registration or license "pertaining to the securities industry in any jurisdiction."
Sbaiti said he's not sure why Castaldo and WSBSH have not caught the attention of federal regulators.
"I can't believe the SEC hasn't shut this guy down directly, because what he's doing is in clear violation of the SEC's rules," Sbaiti said.
Oxysure claims Castaldo's brother, co-defendant Jerry Castaldo, called it to "smooth things over" when it became dissatisfied with WSBSH's services.
Oxysure seeks damages for violations of the Texas Securities Act and the Securities Exchange Act.
Sbaiti is with Steckler LLP in Dallas.
WSBSH and Chris Castaldo did not respond to a request for comment.Follow @@cam_langford
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