(Bloomberg) -- A stock promoter admitted he joined a plot to dupe investors out of $131 million by touting stock in a worthless LED lighting distributor, lying to investors while appearing on a cable television business show.
Herschel Knippa III, one of nine people charged in the scam, pleaded guilty Monday in federal court in Brooklyn, New York. Knippa teamed with brokers and other stock promoters to convince unwary investors that a company called ForceField Energy Inc. was worth hundreds of millions of dollars when it was worthless, Brooklyn U.S. Attorney Robert Capers said.
Knippa, owner and head trader of Dallas-based Kenai Capital Management LLC, a commodities trading firm, was asked during a 2014 appearance on Fox Business Network's “Varney & Co.” whether he owned shares of ForceField, prosecutors said.
“You bet I do,” he answered, according to prosecutors. “I put my money where my mouth is.”
Knippa actually owned no ForceField stock, prosecutors said.
Pocketed Thousands
On Monday, Knippa told U.S. Magistrate Judge Ramon Reyes that he pocketed thousands of dollars in secret payments from promoters.
“I know what I did was wrong,” he said.
Knippa collected more than $1.9 million from at least 10 investors, according to the U.S. He was arrested last year with Christopher Castaldo, a former Stratton Oakmont Inc. broker who worked for Jordan Belfort, depicted by Leonardo DiCaprio in the film, "The Wolf of Wall Street."
Knippa faces between 30 to 37 months in prison when he's sentenced by U.S. District Judge Brian Cogan in May. His lawyer, Jacob Kaplan, declined to comment after court.
So far, seven of nine defendants have pleaded guilty. Castaldo is scheduled to plead guilty on March 1, according to court records. His lawyer didn't return a call seeking comment.
The case is U.S. v. Mitchell, 16-cr-234, U.S. District Court, Eastern District of New York (Brooklyn).
To contact the reporter on this story: Patricia Hurtado in New York at pathurtado@bloomberg.net.
To contact the editor responsible for this story: David Glovin at dglovin@bloomberg.net.
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