News built for finance pros
CFO Brew helps finance pros navigate their roles with insights into risk management, compliance, and strategy through our newsletter, virtual events, and digital guides.
Andrew DeFrancesco was only the chairman of electronics retailer Cool Holdings for nine months, but he managed to rack up $3 million in SEC-imposed penalties for his time there. Four and a half years after serving as chairman of the company, DeFrancesco avoided jail for an alleged pump-and-dump scheme, but now owes a pile of cash, and is barred from serving as an officer or director of a public company.
DeFrancesco didn’t admit wrongdoing as part of consenting to the SEC’s judgment against him.
According to prosecutors, DeFrancesco accumulated a stake in the firm while the share price was low through accounts in others’ names. His holdings eventually peaked at “more than 32% of Cool’s outstanding shares.” Prosecutors say he then filed false statements in the company’s financial disclosures, and hired a six-figure promoter to get positive articles written about the firm.
The SEC alleged in January that he secretly funded the publication of false news articles that claimed, among other things, “that Cool’s stores were more profitable per square foot than retailers such as Tiffany & Co. and Michael Kors, and that Cool planned to expand the number of its Apple-product-focused stores from nine locations in March 2018 to 200 locations by 2020.”
In reality, according to the 50-page complaint, Apple was unhappy about unpaid invoices in late 2017, and terminated deals with the company in 2018, and at the same time, DeFrancesco’s company was more than $75,000 behind on rent payments for its corporate headquarters.
Having artificially boosted the share price, DeFrancesco allegedly sold more than $8 million worth of shares, “all through accounts nominally controlled by his ex-wife Catherine DeFrancesco and other family members.”
Prosecutors said DeFrancesco’s ex-wife and former executive assistant were in on the alleged scheme, allegedly helping him set up and track the stock-trading accounts, and selling shares on his behalf. They also struck deals with the SEC, accepting penalties of more than $100,000 each.
The SEC is continuing its litigation against the company’s CEO and chief marketing officer, who were named as alleged co-conspirators in the original complaint.