A jury has convicted two men for conspiring to inflate the prices of a low-value stock sold to investors. After a trial lasting over four weeks, Paul Spivak, 65, of Willoughby Hills, Ohio, and Charles Scott, 70, of Alexandria, Virginia, were found guilty of conspiracy to commit securities fraud. Spivak was also found guilty on two counts of wire fraud in the first stage of the trial and pled guilty to additional charges. Scott was found guilty in the second stage.
Spivak was the majority owner and CEO of U.S. Lighting Group, Inc. (USLG), a publicly traded Florida corporation based in Euclid, Ohio. The company focused on commercial LED lights and other products and traded as a penny stock due to its lower market value.
Between 2016 and 2019, Spivak and his co-conspirators manipulated USLG’s stock price for financial gain. They took USLG public through a reverse merger with a shell company and used call rooms to inflate the stock price. Richard Mallion, previously convicted of securities fraud and banned from the industry for life, assisted in this scheme.
Investors across the country were pressured into buying USLG stock while Mallion and others arranged sell orders to match buy orders generated by call rooms. Spivak also arranged for unlicensed brokers to cold-call investors using aliases to sell restricted shares at discounted prices relative to their apparent market value.
From 2016 to 2019, USLG received approximately $6.9 million from restricted stock investors in increments ranging from $4,000 to $1 million. During this period, around $2 million in undisclosed commissions were paid to unlicensed brokers through fraudulent consulting agreements.
In early 2021, Spivak and Scott engaged with undercover agents posing as co-conspirators planning to inflate USLG’s stock price further. They arranged for Scott to sell free-trading USLG stock at inflated prices with proceeds partially kicked back to USLG.
Six co-conspirators had previously pled guilty in this matter including Mallion and Spivak’s wife Olga Smirnova among others involved as unlicensed brokers or using stolen identities.
“These men orchestrated an aggressive fraudulent scheme…at the expense of others,” said U.S. Attorney Rebecca C. Lutzko for the Northern District of Ohio. “This verdict helps protect our citizens…and serves as a warning.”
Sentencing is scheduled for January 2025 with Spivak facing up to 170 years in prison while Scott faces up to 25 years.
The FBI Cleveland Division investigated this case which was prosecuted by Assistant U.S Attorneys Elliot Morrison Megan Miller Stephanie Wojtasik
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