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Joseph Taub, 41, must serve the entire term because there’s no parole in the federal prison system.
U.S. District Judge John Michael Vazquez also sentenced Taub via teleconference from Newark to one year of supervised release, while ordering him to forfeit $17.1 million and pay restitution of $394,424 to the IRS.
The Department of Justice also has reached a settlement of a civil forfeiture case against assets acquired by Taub and his family as a result of the scheme, U.S. Attorney Craig Carpenito said.
Taub previously told the judge that he and others secretly coordinated trading in dozens of brokerage accounts in order to manipulate securities prices.
They created straw accounts in the names of family members and others who Carpenito said "neither controlled the accounts nor traded the securities held in the accounts."
"Taub funded many of these accounts and used the account holders to conceal the scheme from regulators and law enforcement," the U.S. attorney said.
The scheme involved two types of accounts, Carpenito said.
First was a "winner" that bought a large block of shares in a particular security. Then there was a "loser" account that Carpenito said placed several orders on the same security "to create upward pressure on the stock price."
Once the prices rose, the conspirators sold the shares in both, Carpenito said.
Sales from the winner account more than made up for the losses from the losers, he said.
Taub admitted that he defrauded the government by hiding the identities of the those running the scheme from the brokerage firms and the IRS, the U.S. attorney added.
“As a result, the profits from the straw accounts were taxed at the lower tax rates applicable to the straw account holders instead of the higher tax rates applicable to Taub, which allowed Taub to avoid $394,424 in taxes,” he said.
Taub was a client of Shaun Greenwald of Long Island, who admitted his role in the scheme two years ago.
"As part of the scheme, Greenwald opened brokerage accounts in his name or entities that he controlled," Carpenito said. "However, the vast majority of the funding for these accounts was provided by Taub, which Greenwald concealed on the account opening forms.
"Greenwald then provided the log-in and password information to Taub so that he and others could use the accounts for trades. In return, Greenwald was paid a portion of the profits made from his accounts."
Greenwald also admitted cooking the books for the conspiracy, including calculating the taxes on profits made from the straw accounts, the U.S. attorney said.
Taub gave the account holders funds for the taxes on his portion of the straw account profits but "failed to declare any of this income on his tax returns," he said.
Under the terms of a civil settlement with the government, Taub and his family members agreed to forfeit all assets subject to the pending forfeiture complaint in which they have a potential interest.
Taub is also required to cooperate with and assist the Justice Department in the “orderly transfer, management and disposition of the relevant assets,” Carpenito said.
The U.S. attorney credited special agents of the FBI and IRS – Criminal Investigation and his office with the investigation, while thanking the SEC’s New York Regional Office for its assistance.
Handling the case for the government are Criminal Division Deputy Chief Daniel Shapiro, Senior Trial Counsel Catherine R. Murphy and Assistant U.S. Attorney Jennifer S. Kozar of Carpenito’s Criminal Division in Newark; and Sarah Devlin, who is chief of his Asset Recovery and Money Laundering Unit.
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