A Boca Raton attorney has been sentenced to 84 months in prison and ordered to pay restitution of $19.7 million to 2,156 investors for his role in a pump-and-dump securities fraud scheme. James M. Schneider, 77, was convicted on December 7, 2018, by a federal jury after a two-week trial in Miami (Case No. 17-20712-CR-FAM(s)).
Schneider was convicted of conspiracy to commit securities and wire fraud, in violation of Title 18, United States Code, Section 1349; securities fraud, in violation of Title 18, United States Code, Section 1348; wire fraud, in violation of Title 18, United States Code, Section 1343; conspiracy to commit money laundering, in violation of Title 18, United States Code, Section 1956(h); and money laundering, in violation of Title 18, United States Code, Section 1957.
According to evidence introduced at trial, from approximately 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 (CEO).
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 in 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.
Schneider, according to the evidence introduced at trial, 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’s scheme involved the sale of shares of fake companies to investors for millions of dollars. The scheme was uncovered and Schneider was convicted in 2018. Schneider was sentenced on April 10, 2019, and ordered to pay restitution of $19.7 million and forfeit $4.8 million.
Key Facts
- State: Florida
- Category: Fraud & Financial Crimes
- Source: DOJ Press Release â†â€â€
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