CLEVELAND – A jury convicted Paul Spivak, 65, of Willoughby Hills, Ohio, of conspiracy to commit securities fraud in a two-stage trial that proceeded for over four weeks. Spivak was also found guilty of two counts of wire fraud in the first stage of trial, and he then pled guilty to four other counts of wire fraud, two counts of securities fraud, and a separate count of conspiracy to commit securities fraud.
Spivak’s co-conspirator, Charles Scott, 70, of Alexandria, Virginia, was also found guilty of conspiracy to commit securities fraud and one count of securities fraud in the second stage of trial.
According to court documents, trial testimony, and exhibits, Spivak was the majority owner and chief executive officer of U.S. Lighting Group, Inc. (USLG), a publicly traded Florida corporation based in Euclid, Ohio, that focused on the design and manufacture of commercial LED lights, aftermarket auto parts, and fiberglass recreational campers and boats. The company traded on OTC Markets under the ticker USLG and was considered a “penny” stock due to its lower market value.
Betweeen 2016 and 2019, Spivak and his co-conspirators manipulated USLG’s stock price to their financial benefit. They arranged to take USLG public through a reverse merger with a shell company and artificially inflated or “pumped” up the price of USLG stock using call rooms and other manipulative practices.
One co-conspirator who helped to take USLG public and inflate the stock price was Richard Mallion, who was previously convicted of securities fraud and banned for life from participating in the securities industry. Numerous investors throughout the country were pressured to purchase USLG stock while Mallion and other co-conspirators covertly arranged for sell orders to match with the buy orders that the call rooms generated.
While the stock price was artificially inflated, Spivak arranged for co-conspirators to act as unlicensed stockbrokers, cold-calling investors to sell them restricted shares of USLG stock. The brokers used aliases and represented the stock as offered at a steep discount relative to the apparent market price. Spivak arranged to pay those brokers large, undisclosed commissions, while concealing the true nature of USLG’s payments to those brokers by entering into fraudulent consulting agreements with them and requiring them to submit invoices that falsely described commission payments as payments for other services.
Between 2016 and 2019, USLG took in approximately $6.9 million from numerous restricted stock investors—many of them elderly and located throughout the country—in increments between $4,000 and $1 million. During that time, the company made approximately 200 payments totaling $2 million in undisclosed commissions to those unlicensed stockbrokers.
From February through June of 2021, Spivak and Scott engaged with undercover agents and a confidential source, who together posed as co-conspirators arranging to artificially inflate or “pump” up the price of USLG. Spivak arranged for them to receive stock, to be sold at inflated prices, from Scott and another co-conspirator, who had also agreed to kick back proceeds to USLG.
Spivak and Scott arranged for Scott to sell free-trading USLG stock to undercover agents and to send approximately half of the proceeds of those sales back to USLG in exchange for additional restricted stock. Undercover agents, in turn, would sell USLG stock at inflated prices, and then use some of the profits to buy more free-trading shares from Scott, who would then kick back additional money to USLG to buy more restricted stock.
Six of the defendants’ co-conspirators previously pled guilty to conspiracy to commit securities fraud and other charges.
Related Federal Cases
- Jason Herceg, Mortgage Fraud Scheme and Elder Fraud Conspiracy, Fai… · New York
- James Osborne, Mortgage Fraud, Ohio 2023 · Virginia
- Jerry A. Cicolani, Jr., Sale of Unregistered Securities, Ohio 2024 · New York
- Ileana E. Osborne, Mortgage Fraud Scheme, FL, 2023 · Virginia
- Gerald Smith Jr., $80,000 Fraud, OH, 2023 · Virginia
Key Facts
- State: Ohio
- Category: Fraud & Financial Crimes
- Source: DOJ Press Release â†â€â€
ðŸâ€Â’ Get the grimiest stories delivered weekly. Subscribe free →
