Two companies listed on the AIM (alternative investment market) in London were at the centre of an international fraud that cost investors US$140 million ($223 million), it is alleged.
According to reports, New Zealand investors are among those that have been caught up in the fraud.
The Securities Commission said
yesterday that it had not yet received any complaints from investors here.
Ross Mandell, a self-confessed "bad boy" from the era of drug-fuelled trading on Wall St, used the two London-listed companies, Sky Capital Holdings and Sky Capital Enterprises, to fund a lavish lifestyle for himself and to shower gifts on favoured employees, according to criminal and civil charges laid yesterday.
According to legal filings, Mandell squandered money raised from AIM investors to pay for personal expenses, including a decorator for his penthouse in a Trump tower in New York and to fund "extravagant" business trips to London.
All the while, he was lying to investors about the companies and using the Sky Capital broking business in New York to manipulate their share prices on the AIM.
Sky Capital Holdings was a small stockbroking company floated on the AIM in 2002, with Grant Thornton as its nominated adviser. Its prospectus disclosed Mandell's chequered past, including that the National Association of Securities Dealers in the US was only allowing Sky to operate on the promise that he would not be personally involved. Yet, according to a criminal complaint, he was deeply involved in management.
Sky Capital brokers were heavily incentivised to sell the company's own shares to clients and secretly ran a "no net sales" policy which meant they would not process sales of the shares unless they could find a corresponding buyer.
Meanwhile, Mandell personally lied to AIM investors, including two Manchester-based investors who had bought US$1 million of Sky Capital shares. He persuaded them not to cash out, telling them he was about to sell the company to a German bank at twice the current share price. That was a fiction, it is alleged.
Mandell was charged with five others on two counts of fraud that carry a 25-year prison sentence. The two Sky companies were delisted after the FBI raided their New York office in 2006, rendering the shares worthless.
- INDEPENDENT
