Former Registered Broker Sentenced To 15 Months In Prison For Securities Fraud In A $131 Million Market Manipulation Scheme
Defendant Profited By Selling To Investors Worthless ForceField Energy Stock That Purported To Be Worldwide Distributor of LED Lighting Products
Herschel C. Knippa III, also known as “Tres,” a former registered broker and owner of a commodities trading firm who regularly appeared on television news networks to discuss investment strategies, was sentenced earlier today at the federal courthouse in Brooklyn, New York, to 15 months in prison, three years of supervised release, $3,570,000 in restitution, and $120,000 in forfeiture. Knippa had previously pled guilty to securities fraud conspiracy for his role in the fraudulent market manipulation of ForceField Energy Inc. (ForceField), a publicly traded company previously listed on the NASDAQ under the ticker symbol “FNRG.”
The sentencing was announced by Bridget M. Rohde, Acting United States Attorney for the Eastern District of New York, and William F. Sweeney, Jr., Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office.
According to court filings and facts presented at the sentencing hearing, between 2009 and 2015, the defendant and others engaged in a scheme to defraud investors in ForceField, a purported worldwide distributor and provider of LED lighting products and solutions, by artificially controlling the price and volume of traded shares of ForceField. Knippa and others committed this crime by, among other means: (1) secretly using nominees to purchase and sell ForceField stock without disclosing this information to investors and potential investors; (2) orchestrating the trading of ForceField stock to create the misleading appearance of genuine trading volume and interest in the stock; and (3) concealing secret payments to stock promoters and broker dealers who promoted and sold ForceField stock to investors and potential investors while falsely claiming to be independent of the company. The fraudulent scheme caused a loss of approximately $131 million to the investing public.
Between July 2014 and March 2015, Knippa received kickbacks from a ForceField executive for promoting the purchase of ForceField stock to investors, including by recommending the purchase of ForceField stock at investor conferences and during television appearances on the Fox Business and Business News Network channels. Knippa did not disclose his secret compensation during those conferences and television appearances, and falsely claimed that he owned ForceField stock when he did not. For example, in one television appearance at which he urged viewers to purchase them, Knippa was asked if he personally owned ForceField shares. In response, he falsely stated, “You bet I do. I put my money where my mouth is.” Knippa and his co-conspirators took pains to conceal their participation in the fraudulent scheme by using prepaid, disposable cellular telephones and encrypted, content-expiring messaging applications to communicate with each other, and by paying kickbacks in cash during in-person meetings.
Today’s proceeding, which took place before United States District Court Judge Brian M. Cogan, is the fifth sentencing to take place in connection with the ForceField securities fraud. Three other defendants who pleaded guilty in this matter, and one defendant convicted after trial, remain to be sentenced.
The government’s case is being handled by the Office’s Business and Securities Fraud Section. Assistant United States Attorneys Mark E. Bini and Lauren H. Elbert are in charge of the prosecution.
HERSCHEL C. KNIPPA III
Residence: Dallas, Texas
E.D.N.Y. Docket No. 16-CR-234 (S-1) (BMC)