Seijin Ki, Securities Fraud, Massachusetts 2013

BOSTON – In a shocking turn of events, a Canadian man who served as an executive of two public companies, both of which traded on the over-the-counter securities market, was sentenced to 15 months in prison for his role in a securities fraud scheme.

Seijin Ki, 42, of Toronto, was sentenced by United States District Court Judge William G. Young to 15 months in prison, one year of supervised release, a $4,000 fine, and ordered to forfeit illegal earnings. In October 2013, Ki pleaded guilty to wire fraud and mail fraud.

Ki was convicted for his role in a scheme to pay secret kickbacks to an investment fund representative who had agreed to steer the investment fund to buy stock in Lightlake Therapeutics, Inc. and Church & Crawford, Inc. The kickbacks were concealed through the use of a sham consulting agreement and other fraudulent documents. Ki did not know that the purported investment fund representative was actually an undercover federal agent.

The conviction and sentence followed a year-long investigation focusing on preventing fraud in the micro-cap stock markets. Microcap companies are small publicly traded companies whose stock often trades at pennies a share. Fraud in the microcap markets is of increasing concern to regulators as such markets have proven to be fertile grounds for fraud and abuse. This is, in part, because accurate information about microcap stocks may be difficult for the average investor to find, since many microcap companies do not file financial reports with the Securities and Exchange Commission.

Ki is one of 15 defendants convicted of crimes associated with the illegal kickback scheme.

The Securities and Exchange Commission, which conducted a parallel civil investigation alongside the FBI undercover operation, cooperated with criminal authorities in bringing these charges, as well as those against the other defendants.

United States Attorney Carmen M. Ortiz and Vincent B. Lisi, Special Agent in Charge of the Federal Bureau of Investigation, Boston Field Division, made the announcement today. The case was prosecuted by Assistant U.S. Attorneys Sarah E. Walters and Vassili Thomadakis of Ortiz’s Economic Crimes Unit.

This case was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force. President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes.

Source: https://www.justice.gov/usao-ma/pr/executive-two-publicly-traded-companies-sentenced-15-months-securities-fraud-scheme