Tout service operator jailed, barred from industry
Forcefield defendant Castaldo receives two years
A NEW York judge has imposed a two-year sentence on Christopher Castaldo, a stock tout who was part of the Forcefield Energy Inc. manipulation. The judge has also ordered Mr. Castaldo to pay $1.8-million in restitution and has imposed three years of probation with terms that bar him from the brokerage industry. (All figures are in U.S. dollars.) Mr. Castaldo must surrender to the Bureau of Prisons on Jan. 12, 2018.
The sentence comes as part of a case in which prosecutors claimed that Mr. Castaldo, 46, helped the Canadian architect of the Forcefield fraud, Richard St. Julien. Ac-
cording to the government, Mr. St. Julien masterminded a manipulation that boosted Forcefield to a $7.54 high. Most investors suffered catastrophic losses after the U.S. Securities and Exchange Commission halted Forcefield on April 21, 2015, citing a possible manipulation in progress. Mr. Castaldo’s role in the manipulation included accepting undisclosed cash and share payments to tout the stock to customers of a newsletter that he ran, the Wall Street Buy Sell Hold. He pleaded guilty to one count of conspiracy to commit securities fraud on March 10, 2017.
Details of Mr. Castaldo’s sentence are contained in a judgment handed down on Wednesday, Dec. 6. The terms of Mr. Castaldo’s probation, which will begin upon completion of his sentence, include providing full disclosure to the U.S. Probation Office of his bank accounts and financial dealings. He must not work in the financial industry and must participate in a drug treatment program.
In imposing the two-year jail term, the judge appears to have paid little attention to pleas from Mr. Castaldo for leniency. Ahead of his sentencing, he had asked that the judge allow him to continue working, so that he could pay his $1,500-per-month child support bill. He also said that since his crime he had overcome a cocaine habit and a drinking problem that included two bottles of vodka each day. He claimed to have given up cocaine in 2015 and to have quit drinking in February, 2017.
The judgment, however, appears designed to enforce Mr. Castaldo’s sobriety. In addition to the jail term, the judge ordered Mr. Castaldo not to consume alcohol or other intoxicants during his three-year probation. To ensure compliance, the judge included a term requiring Mr. Castaldo to submit to testing. On top of that, Mr. Castaldo must pay for his drug treatment program in an amount “determined reasonable by the Probation Department’s Sliding Scale for Substance Abuse Treatment Services” and must make every effort to secure insurance or Medicaid payment for such services, the judgment states.
The judge did not state his reasons for the two-year term, but the factors undoubtedly included Mr. Castaldo’s regulatory history. In that history is a $280,000 sanction that the SEC won against him in 2009. The SEC said that he solicited investors for a purported on-line shopping business without being properly registered.
(Among Mr. Castaldo’s co-defendants in that case was Frank Zangara, a New York man who is now serving two years in jail for an unrelated fraud. Prosecutors said that Mr. Zangara was part of a scheme to manipulate Everock Inc., a subpenny listing once domiciled in Ontario. The defendants in that case included Canadian Michael Randles, who is serving a four-year term for that manipulation.)
The sentence for Mr. Castaldo is one of the lengthier ones handed down to date
in the Forcefield case. Prior sentences include a one-month term for Pranav Patel, a Florida broker who received secret kickbacks to place clients into Forcefield. Others sentenced include former TV commentator Tres Knippa, who received 15 months, and former Florida broker Gerald Cocuzzo, who received 18 months. Also previously sentenced was Florida broker Naveed Khan, who is serving two years in jail.
The most substantial sentences in the case may be those that have yet to come, however. Still awaiting sentencing is Louis Petrossi, a Nevada man who attended several investment conferences at which he held himself out as an independent investment professional. He recommended that investors buy Forcefield, and did so without disclosing kickbacks that he was receiving. Prosecutors are seeking up to 15 years in jail for him. For his, part, Mr. Petrossi says that his age (75) and poor health favour a lighter sentence.
Also yet to be sentenced is the scheme’s Canadian mastermind, Mr. St. Julien. He has been in custody since April 17, 2015, when U.S. authorities arrested him as he was attempting to board a flight to Costa Rica from Florida. He has since pleaded guilty under circumstances that are far from clear, as the proceedings against him are not public.
The charges against Mr. Castaldo are contained in an SEC complaint and a criminal indictment filed on May 3, 2016, in the Eastern District of New York. The complaint identified Mr. Castaldo as the president of two newsletter publishing companies. He was also a broker from 1992 to 1998.
Around the time of the Forcefield scheme, he ran a call centre in New York that he used to cold-call potential subscribers to his tout sheets. Starting in May, 2011, Mr. St. Julien paid him to pitch investors on Forcefield, the SEC said. Mr. Castaldo recommended the company through his tout sheets and by having his employees solicit the stock over the phone, according to the complaint.
Investors did not know that Mr. Castaldo had received substantial fees for this touting, the SEC claimed. He or his company collected $183,000 in kickbacks plus $229,000 worth of shares for the money that his call centre employees directly raised. He also received $241,000 for the touting in his newsletters, according to the complaint.
The criminal charges are securities fraud, conspiracy to commit securities fraud, wire fraud, money laundering and making a false statement to law enforcement officials. Mr. Castaldo and his co-defendants all pleaded guilty to one or more of the charges without a trial. The only exception was Mr. Petrossi, who was convicted after a two-week jury trial.