Sandeep Shah and Shailesh Shah charged with wire fraud in US court

BOSTON (TIP): Two Indians are among seven people charged in a US federal court here with wire fraud for their roles in a stock kickback scheme and face up to 20 years in prison if convicted. The charges against stock promoter Sandip Shah, 40, and CEO of a firm Shailesh Shah, 47 – both from California – followed a lengthy investigation focusing on preventing fraud in the microcap stock markets.

They also face a $250,000 fine on each count. According to the charges, the schemes involved secret kickbacks to an investment fund representative in exchange for having the investment fund buy stock in certain companies. The kickbacks were to be concealed through the use of sham consulting agreements.

The defendants, however, were not aware that the investment fund representative was actually an undercover government agent. Microcap companies are small publicly traded companies whose stock often trades at pennies per share. Fraud in the microcap stock market is of increasing concern to regulators since such markets tend to be fertile grounds for fraud and abuse, the FBI said in a release. “Secret deals like the ones alleged today harm hard working Americans who invest their savings in the financial markets.

Illegal kickbacks undermine fair competition and ultimately destabilize financial markets. For the sake of the investing public, it is critical to protect the integrity of the financial markets and promote fair play by combating the types of illegal agreements alleged in these cases,” US attorney Carmen Ortiz said on Thursday. The others charged in the scheme are Shmuel Shneibalg, Gerard Haryman, Ronald Lawrence Schuman, Barry Hawk and Hadi Aboukhater.


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