The kickbacks were concealed through the use of sham consulting agreements and other fraudulent documents. Shah and the company executives were unaware that the purported investment fund representative was actually an undercover agent with the FBI. The conviction followed a year-long investigation focusing on preventing fraud in the micro-cap stock markets.
Micro-cap companies are small publicly traded companies whose stock often trades at pennies a share. Fraud in the micro-cap markets is of increasing concern to regulators as such markets have proven to be fertile grounds for fraud and abuse.
This is, in part, because accurate information about micro-cap stocks may be difficult for the average investor to find, since many micro-cap companies do not file financial reports with the Securities Exchange Commission.
The SEC, which conducted a parallel civil investigation alongside the FBI operation, cooperated with criminal authorities in bringing charges against Shah and 20 other defendants who participated in the kickback scheme. (PTI)