Investor Lawyers Blog
This July, a jury found Sky Capital founder Ross Mandell and ex-broker Adam Harrington guilty of securities fraud and conspiracy. Allegedly topping $140 million, the stock broker fraud occurred between 1998 and 2006, according to prosecutors. Preet Bharara, Manhattan U.S. attorney, stated that Mandell and Harrington are, “masters of deception who had no qualms about lying to investors, manipulating stock prices, and using dubious trading practices to enrich themselves at the expense of their victims.”
In 2005, Forbes Magazine nicknamed Mandell Wall Street’s “bad boy broker” and it’s no wonder, with the bad publicity Sky Capital has received. A Forbes article released in July of 2011 by Walter Pavlo describes “the low bar of becoming a stockbroker” at Sky Capital. McKyle Clyburn, a witness at Mandell’s trial, described how he lied about his name, age and “pretty much everything” when first becoming a stock broker and then found himself a home at Sky Capital — despite his aversion to reading and writing and his drug abuse — making sometimes as much as $750,000 a year. He also stated that using margin trades to burn through a client’s money to earn himself commissions was common at Sky Capital. Clyburn is one of four former Sky Capital employees to plead guilty to criminal charges and then testify to their broker misconduct at Mandell and Harrington’s trial.
The trial lasted five weeks and testimonies like Clyburn’s exhibited the kind of lifestyle that Sky Capital brokers enjoyed at the expense of their clients. According to the Wall Street Journal, evidence introduced by prosecutors also showed that over $162,000 of Sky Capital investors’ money went to “adult entertainment expenses.” Attorneys for both Mandell and Harrington say they will appeal.
Mandell and Harrington have not yet been sentenced and were taken into custody pending U.S. District Judge Paul Crotty’s delayed decision.