Sandip, Shailesh Shah were involved in microcap stock kickback scheme.
By Deepak Chitnis
WASHINGTON, DC: Two Indian American businessmen have been indicted on charges of engaging in wire and mail fraud, as part of a microcap stock kickback scheme that could see them spending decades behind bars.
Sandip Shah (40) and Shailesh Shah (47) were originally arrested on February 27 of this year. Both men are residents of Chino, California; Sandip is facing charges on nine counts of wire fraud, while Shailesh has been charged with two wire fraud counts and two counts of mail fraud.
According to the Department of Justice, Sandip was a penny stock promoter who assisted public companies in locating and acquiring sources of funding to increase capital. Shailesh – the president and CEO of SOHM, Inc. and Costas, Inc., two publically traded companies in California – was involved in a kickback scheme, through which he made illicit payments to an investment fund so long as that fund bought stocks in his own companies.
Sandip and Shailesh came together because the former Shah was the one who initiated the agreement between Shailesh and the unnamed investment firm, setting up the kickback scheme. What neither men knew was that the person they were liaising with, who claimed to be a representative of this investment company, was actually a federal agent who was undercover as part of microcap stock fraud investigation.
Now, both Sandip and Shailesh are looking at a maximum sentence of 20 years in prison, along with a fine of $250,000 or twice the amount of gain or loss that was incurred as a result of their activities.
The investigation was mounted by the Financial Fraud Enforcement Task Force, established by President Barack Obama to “wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes.†The task force is inter-agency, and has been responsible for a large number of successful investigations since its inception during the Obama Administration.
Neither Sandip nor Shailesh has officially entered a plea yet, and the Department of Justice press release notes that both men are still facing allegations, as nothing has been definitively proven and no convictions have been handed down. A date for the next step in the trial has not yet been announced.