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by Mike Caswell

Joseph Padilla, a California man who pleaded guilty to criminal charges arising from an OTC Markets scheme that he ran through a Canadian brokerage, has received 5-1/2 years in jail. Prosecutors claimed that Mr. Padilla inflicted losses of at least $42.5-million on investors through multiple stock market schemes, including the manipulation of a company that claimed to be developing cancer treatments. (All figures are in U.S. dollars.) He moved money through offshore accounts, at one point meeting a "straight gangster banker."

Mr. Padilla received his sentence in an appearance late Wednesday before a judge in federal court in Boston. In addition to the 5-1/2 years in prison, the judge ordered Mr. Padilla to pay $3-million in restitution and to pay forfeiture in an amount to be determined at a later date. Once he has completed his prison term, Mr. Padilla must serve one year of supervised release.

The sentence is a victory for prosecutors, who had requested 5-1/2 years in jail. Ahead of sentencing, they said that Mr. Padilla's crime was a serious one, with his operation including banking in Russia and nominees in Mexico, all designed to provide "insulation and protection from U.S. law enforcement." Mr. Padilla used brokerage accounts and nominees to allow hidden insiders to sell shares on the market, and succeeded in generating tens of millions in profits for those insiders, according to prosecutors.

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