Tout ser­vice operator jailed, barred from in­dus­try

Force­field de­fen­dant Castaldo re­ceives two years

Stockwatch Daily - - FRONT PAGE - By Mike Caswell

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.



Christopher Castaldo

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