If FTE Networks sounds familiar to our readers, it is because it was a huge story throughout our state last year. The company imploded last year, filed bankruptcy and was even delisted from the New York Stock Exchange. And, now the former CEO and CFO face securities fraud charges from the SEC, among many other charges by local prosecutors.
The FTE Networks implosion
FTE Networks used to be a telecommunications company before its bankruptcy. Now, apparently, it is doing residential real estate leasing. Prior to the bankruptcy, it is alleged that due to the bad acts of the company’s former CEO and CFO, the stock price plunged. As a result, this triggered several debt obligations from lenders that forced the company into bankruptcy, which further crashed the stock and lead to the company’s NYSE delisting.
Who was charged?
So far, only two people face charges. Specifically, Michael Palleschi, the ex-CEO of FTE Networks from 2014 through May 2019, and David Lethem, the ex-CFO of the company from June 2014 to March 2019, were charged with various securities fraud by the Securities and Exchange Commission. This is in addition to the multiple criminal charges these individuals face from other federal prosecutors and the Manhattan District Attorney’s office.
What was alleged?
In essence, both local and federal officials claim that the two misappropriated funds for their own purposes and hid FTE Networks’ true financial condition from investors from 2016 through 2019. Specifically, the men are accused of increasing their own salaries without authorization to do so, using company funds to pay for personal credit cards, luxury cars and even the use of a private jet. This includes embezzling nearly $30 million in construction trust assets in 2018. In addition, the SEC claims that the pair made unauthorized wire transfers to pay-off or pay third-party loans. Finally, they allege that they issued over $20 million in convertible debt and warrants without authorization and without informing investors.
The consequences
For Brooklyn, New York, residents, being charged with White Collar Crimes, like securities fraud carries extremely harsh punishment potential, especially when charged by multiple local, state and federal entities. This is why it is so important to contact an attorney immediately.