FLORIDA
A Boca Raton attorney was sentenced Friday to seven years in prison and ordered to pay restitution of $19.7 million to 2,156 investors who he duped, according to officials.
James M. Schneider, 77, a securities lawyer from Boca Raton, Florida, was convicted on December 7, 2018, by a federal jury after a two-week trial in Miami
He was convicted by a federal jury of 33 counts of conspiracy, securities fraud, wire fraud, and money laundering offenses. This case involved a scheme to fraudulently register public shell companies with the U.S. Securities and Exchange Commission (SEC), issue a class of purported free-trading shares that were secretly controlled, and sell these shares as part of pump-and-dump stock swindles.
According to evidence, from about March 2008 through the end of 2013, Schneider participated in a fraudulent “shell factory” scheme, in which the conspirators created approximately 20 shell companies and filed numerous false documents with the SEC.
The filings falsely stated that the companies were controlled by a nominee chief executive officer. The straw CEO would be listed as the owner of the control block of shares but in reality the companies were controlled by the undisclosed principals.
The control block of shares listed in the name of the sole officer were deemed restricted and could not be sold to the public.
The principals would register an offering of shares with the SEC and put these shares the names of various shareholders for each company to make it appear that these shares were owned by persons unaffiliated with the company.
These shares would later be deemed “free trading” and secretly sold to shell buyers.
Using false and fraudulent documentation describing the companies’ business purpose and share ownership, the conspirators would then obtain approval to sell the companies’ shares publicly in the open market.
Thereafter, the conspirators would sell the companies to shell buyers who would secretly obtain both the control shares and the purported “free trading” shares without disclosure to the SEC or the investing public.
These buyers would then use the shares to conduct pump-and-dump stock swindles and other securities manipulation schemes. Evidence at trial showed that the shares of the fake companies were then sold to investors for millions of dollars.
Schneider, according to the evidence, was a Florida attorney who authored false and fraudulent legal opinion letters indicating that shares of the 20 companies that were owned by persons who were not “affiliates,” when in truth and in fact the shares were owned and controlled by the conspirators.
Schneider also created false billing records to make it appear that he was performing work for, and taking direction from, the straw CEOs.
In reality, he took his direction from his co-conspirators, who sought to keep their names off publicly filed documents.
Schneider also performed so-called escrow services for the sale of the shell entities, including the illegal sale of the purported free trading shares, and wired more than $5.6 million in proceeds to bank accounts controlled by the conspirators.
Schneider did this, according to evidence introduced at trial, without authorization from the named shareholders or verification that the persons whose names were listed on escrow agreements authorized or approved these transfers, according to authorities.
Eleven other defendants have been convicted in the Southern District of Florida in connection with the Shell Factory Fraud investigation