Two Indians are among seven persons charged in a US federal court here with wire fraud for their roles in a stock kickback scheme and might be subjected to a sentence of 20 years in prison.
Stock promoter Sandip Shah, 40, and CEO of a firm Shailesh Shah, 47, of California have been charged with wire and mail fraud and would face up to 20 years each in prison if convicted.
The defendants also face a $ 250,000 fine on each count.
According to the charges, the schemes involved secret kickbacks to an investment fund representative in exchange for having the investment fund buy stock in certain companies.
The kickbacks were to be concealed through the use of sham consulting agreements.
The defendants, however, were not aware that the investment fund representative was actually an undercover government agent.
The charges follow a lengthy investigation focusing on preventing fraud in the microcap stock markets.
Microcap companies are small publicly traded companies whose stock often trades at pennies per share.
The FBI said in a release that fraud in the microcap stock market is of increasing concern to regulators since such markets tend to be fertile grounds for fraud and abuse.
“Secret deals like the ones alleged today harm hardworking Americans who invest their savings in the financial markets. Illegal kickbacks undermine fair competition and ultimately destabilise financial markets.
“For the sake of the investing public, it is critical to protect the integrity of the financial markets and promote fair play by combating the types of illegal agreements alleged in these cases”, US Attorney Carmen Ortiz said yesterday.
The others charged in the scheme include Shmuel Shneibalg, Gerard Haryman, Ronald Lawrence Schuman, Barry Hawk and Hadi Aboukhater.