Two Florida securities attorneys and the former chief operating officer for 1 Global Capital were sentenced to stints in federal prison for participating in a securities fraud that fleeced thousands of investors throughout the country, the Justice Department announced.
Steven Allen Schwartz, the company’s former COO, pleaded guilty to one count of conspiracy to commit wire fraud and securities fraud, and was sentenced to 24 months in prison and ordered to pay more than $36 million in restitution for victims. Attorney Andrew Dale Ledbetter pleaded guilty to identical charges, and was sentenced to 60 months in prison and ordered to pay nearly $149 million, while Jan Douglas Atlas also pleaded guilty, and got eight months in prison and an order to pay more than $29 million in restitution, according to the DOJ.
The three sentences mark the latest developments in the long-running legal case involving 1 Global. In August 2018, the Securities and Exchange Commission charged the company and former CEO Carl Ruderman with defrauding at least 3,600 investors by raising more than $320 million in illegal, unregistered securities between 2014 and July 2018.
Ledbetter acted “in a fundraising capacity” for 1 Global beginning around 2015, while Atlas served as an outside counsel for the company, the DOJ claimed.
“(Ledbetter and Atlas) acted as outside counsel for 1 Global and knew that if 1 Global’s investment offering were determined to be a security, it would undermine the ability of 1 Global to raise funds from retail investors and continue to operate without substantial additional expenses and reporting requirements,” the original complaint against Ledbetter from September 2020 read.
Therefore, Atlas was instructed to write opinion letters with false information, with the understanding they’d be used to conduct the business illegally. In these opinion letters, Atlas wrote that 1 Global’s notes were likely not securities, according to SEC complaints filed against Atlas and Ledbetter in 2020. Ledbetter then used these opinion letters to continue raising money in pitches to investment advisors and investors, according to the DOJ.
Ledbetter personally raised more than $100 million via his own pitches and by enticing investment advisors to join 1 Global, and received about $3 million during the course of the scheme, most of which came as commissions (Atlas received about $627,000 from Ledbetter’s commissions). Though both Ledbetter and Atlas worked for the same law firm, neither of them disclosed the commissions they pocketed to that firm.
Both the SEC and the Justice Department have previously pursued cases against individuals involved in the 1 Global Capital scheme. In January 2020, Alan Heide, the company’s former chief financial officer, was sentenced to five years in prison and ordered to pay restitution totaling more than $57 million. Earlier this year, the SEC charged four individuals (including a father and son) for acting as unregistered brokers and illegally selling at least $24 million in unregistered securities on behalf of 1 Global. The commission had previously charged a Tennessee-based unregistered broker and his firm for pocketing more than $3.5 million in commissions after allegedly selling fraudulent securities to more than 630 investors.