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Stock Promoter Gets 15 Months for $131 Million ForceField Scam

  • Herschel Knippa III pleaded guilty to conspiracy in February
  • Knippa is one of nine people charged in scheme to pump stock

A stock promoter was sentenced to more than a year in prison after admitting he joined in a scam to pump shares of a worthless lighting distributor, depriving investors of $131 million.

Herschel Knippa III, 47, of Dallas is one of nine people charged in the fraud involving ForceField Energy Inc., an LED lighting distributor that had been listed on the Nasdaq. He pleaded guilty in February to conspiracy to commit securities fraud. Five people have been sentenced, while three others who pleaded guilty, and one who was convicted after trial, are still waiting to learn their punishments.
 
Prosecutors alleged that from 2009 to 2015 Knippa and others orchestrated trades to make it seem as if there were more trading volume and interest in the stock. They allegedly hid payments to promoters and broker-dealers who touted the shares and sold them to investors while claiming to be independent. They used pre-paid cellular phones and encrypted messaging applications to communicate and exchanged cash kickbacks in person to avoid detection, prosecutors said.

A federal judge in Brooklyn, New York, on Wednesday sentenced Knippa to 15 months in prison and three years of supervised release, according to a statement from prosecutors. Knippa was also ordered to pay $3.57 million in restitution and forfeit $120,000. He had faced as long as 37 months in prison.

"Mr. Knippa accepts responsibility and looks forward to moving on from this unfortunate chapter in his otherwise unblemished life," said his attorney, Alex Spiro.

Television Appearances

Knippa, owner and head trader of Dallas-based Kenai Capital Management LLC, a commodities trading firm, allegedly collected more than $1.9 million from at least 10 investors. Prosecutors said he also received kickbacks from a ForceField executive to promote shares between July 2014 and March 2015, which he did at investor conferences and during television appearances.

Prosecutors said Knippa didn’t disclose his secret payments and even claimed he owned shares of the company when he didn’t. In one appearance on Fox Business Network’s "Varney & Co." in 2014, he said "you bet" when asked if he held ForceField stock, even though he possessed none.

“I put my money where my mouth is,” Knippa claimed, according to prosecutors.

He was arrested in 2016, with Christopher Castaldo, a former Stratton Oakmont broker who worked for Jordan Belfort, depicted by Leonardo DiCaprio in the film, "The Wolf of Wall Street." Castaldo pleaded guilty in March and is scheduled to be sentenced in October.

The case is U.S. v. Mitchell, 16-cr-234, U.S. District Court, Eastern District of New York (Brooklyn).

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