Six employees of Wall Street retail brokerage Sky Capital ran a $140 million transatlantic boiler room to defraud investors in the United States and Britain, authorities charged on Wednesday.

U.S. prosecutors announced a criminal indictment of securities, wire and mail fraud against broker-dealer founder, President and Chief Executive Officer Ross Mandell, 52, and five others while the U.S. Securities and Exchange Commission also filed civil charges.

The SEC complaint said brokers raised $61 million between 2002 and 2006 from investors, but then enforced a policy that prevented them from selling their stocks in Sky Capital Holdings Ltd and Sky Capital Enterprises Inc (Sky Entities). They were publicly traded on the Alternative Investment Market of the London Stock Exchange until 2006.

Customers were not told that they would be unable to sell their shares, and the no net sales policy helped artificially inflate the price of the Sky Entities stocks, the SEC said. When trading in those stocks was suspended by the London Stock Exchange in 2006, the investments were rendered worthless.

The SEC described the purported fraud as a transatlantic boiler room scheme.

Apart from Mandell, of Boca Raton, Florida, other principals and employees charged were former Chief Operating Officer Stephen Shea, 37, of New York; Adam Harrington, 39, of Miami; Arn Wilson, 52, of Concord, North Carolina; Robert Grabowski, 41, of New York; and Michael Passaro, 46, of Delray Beach, Florida.

All six surrendered to FBI agents on Wednesday morning, FBI spokesman Jim Margolin said.

Calls to phone numbers listed for the New York brokerage went unanswered or were busy.

Shea's lawyer declined to comment. Mandell's lawyer and attorneys for the other four could not immediately be reached. All six were expected to appear in Manhattan federal court later on Wednesday.

Investor funds were substantially used to enrich the defendants and others; to pay excessive undisclosed commissions to brokers and to pay off victims who had lost money through prior purported investment opportunities, the Office of the U.S. Attorney in Manhattan said in a statement.

It said the defendants acted primarily from two successive securities broker-dealers, The Thornwater Company LP and Sky Capital LLC, raising some $140 million for the scheme between 1998 and 2006.

A published overview of the company said that Sky Capital Holdings, through subsidiaries such as Sky Capital LLC, provided financial services and products for international clients. It has another subsidiary Sky Capital UK Ltd.

(Reporting by Grant McCool with additional reporting by Karey Wutkowski in Washington; Editing by Maureen Bavdek)

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