In a recent ruling highlighting the pernicious world of securities fraud, two men, Paul Spivak of Ohio and Charles Scott of Virginia, were found guilty on numerous charges, including conspiracy to commit securities fraud. The jury delivered the verdict following a four-week trial that untangled the web of deceit spun by the defendants to dupe investors into purchasing stock at inflated prices.
Spivak, 65, formerly leading U.S. Lighting Group, Inc. (USLG) as majority owner and CEO, masterminded the scheme alongside his accomplices. According to the U.S. Department of Justice court documents, Spivak was convicted on two counts of wire fraud and entered a guilty plea for various other charges, including four counts of wire fraud, two counts of securities fraud, and an additional count of conspiracy to commit securities fraud. Scott, 70, was found guilty on one count each of securities fraud and securities fraud conspiracy. The convoluted plot, which ran from 2016 to 2019, involved a reverse merger with a shell company and using call rooms to falsely boost USLG’s stock price, a technique commonly called "pumping."
The operation involved few accomplices and pressured numerous, often elderly, investors across the country into acquiring USLG "penny" stock. In contrast, the stock price was artificially inflated. A report from the U.S. Department of Justice revealed that Spivak had arranged for co-conspirators to sell these restricted shares under the guise of steep discounts, all while concealing the true nature of the transactions through fraudulent consulting agreements.
U.S. Attorney Rebecca C. Lutzko for the Northern District of Ohio detailed the scam, stating via U.S. Department of Justice, "These men orchestrated an aggressive, fraudulent scheme to benefit their company, enrich themselves, and to add to their personal coffers at the expense of others." The unlawful activities brought approximately $6.9 million into USLG’s coffers, with the company handing out $2 million in undisclosed commissions to the unlicensed brokers participating in the scheme.
The deception was further compounded in 2021 when Spivak and Scott interacted with undercover agents posing as co-conspirators. This covert operation exposed their intent to keep inflating USLG stock prices through convoluted buy-sell schemes promising kickbacks. Six of the defendants’ cohorts had already pled guilty to their involvement in the conspiracy, shedding more light on the depths of this fraudulent enterprise.
With judgments handed down, Spivak is staring down the possibility of 170 years behind bars, while Scott could face up to 25 years in prison. Sentencings are penned for January 2025, with each man awaiting a federal district court judge’s sentencing decision that will consider the U.S. Sentencing Guidelines and other statutory factors. This case serves as a stark reminder of the unyielding tentacles of greed as it trespasses the law, agreed found a challenging adversary in the FBI Cleveland Division's thorough investigation and the subsequent prosecution by Assistant U.S. Attorneys Elliot Morrison, Megan Miller, and Stephanie Wojtasik.
