Texas: Last defendant pleads guilty in $40M securities fraud

MarketsAssociated Press

The seventh and final defendant has been convicted in what federal prosecutors in Texas call a $40 million securities scam.

John David Brotherton of League City pleaded guilty Tuesday in Houston to conspiracy to commit wire fraud in microcap securities. The indictment defines microcap securities as low-share prices with little or no analyst coverage.

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Investigators say the defendants obtained control of stock in numerous companies, then drove up prices through false and misleading news releases and fraudulent trading techniques. The defendants then resold their shares for a significant profit.

Brotherton faces up to five years in prison.

Prosecutors say five co-defendants from Houston and a sixth from Florida who previously pleaded guilty also await sentencing, with possible prison terms ranging from three to 10 years.