Fort Lauderdale Penny Stock Scheme Exposed by Whistleblower

A former Fort Lauderdale businessman has been ordered to pay $496,000 to the Securities and Exchange Commission for his role in a stock manipulation scheme that raised $2 million from investors for a health and nutrition company that allegedly derived most of its income from stock sales.

A complaint filed by the SEC on April 6 in U.S. District Court in Fort Lauderdale seeks authorization to investigate and potentially seize assets of Matthew T. Mushlin to relinquish $232,925 in sales commissions, prejudgment interest of $23,101, and a civil penalty of $240,000.

In 2018, the SEC accepted Mushlin’s offer to remit the money to close its investigation into the role he played manipulating stock prices and securing investments for a penny stock company, Wellness Center USA Inc.

Mushlin, 53, was ordered in 2018 to pay the $496,000 within 14 days but failed to do so, the new complaint states. Mushlin did not respond to the South Florida Sun Sentinel’s request for comment on the latest filing in the case.

Wellness Center USA, formed in 2010, was originally an online vitamin and supplement distributor that later became a holding company for four subsidiaries, according to the SEC’s 2018 notice of its settlement with Mushlin. Between 2010 and 2017, the company “primarily funded its operations through sales of stock” — raising about $18.6 million. The company is headquartered in Hoffman Estates, Illinois.

Mushlin, who was not registered with the SEC to sell or broker stock, became associated with Wellness’ then-president and CEO Andrew J. Kandelapas through Mushlin’s Fort Lauderdale-based company, Equinox One Consulting LLC, which “purportedly” helped companies identify capital and business opportunities, the filing states.

Florida’s Division of Corporations’ website lists Equinox One Consulting, LLC as operating out of a high-rise condominium at 340 Sunset Dr., Unit 306, in Fort Lauderdale’s Idylewyld neighborhood, between 2007 and 2018. Mushlin is listed as the company’s managing member. Other companies operated by Mushlin at the address include Hong Kong Opportunities, LLC; Asia Global Trust, LLC; Soulstice One Holdings, LLC; and Nextgeninv, LLC. All of the companies are currently listed as inactive.

Between 2012 and 2015, Mushlin worked with Kandelapas, a Chicago-area resident, to secretly buy stock in the company to increase the stock’s price and make the company look attractive to investors, according to SEC filings in the case.

Coordinating with Kandelapas, Mushlin executed more than 800 transactions, buying and selling nearly 4 million shares of Wellness stock between March 2012 and July 2015, “trading nearly every day that the market was open,” the SEC said.

While he was doing this, Mushlin was promoting the company to investors he knew from his other business activities, soliciting purchases of about $2 million from 31 investors and collecting $232,925 in commissions. In 2017, one of Mushlin’s contacts, who is not named in SEC filings, made a $400,000 “strategic investment” in Wellness.

In agreeing to the settlement, Mushlin acknowledged that the SEC’s findings were true. He also agreed not to act as an investment adviser or participate in any penny stock offering.

In 2019, the SEC obtained a judgment against Kandelapas ordering him to pay more than $860,000 in penalties and restitution. He was charged with manipulating Wellness Center’s stock and announcing nonexistent sales of medical devices in press releases. In addition, Kandelapas took more than $450,000 in unauthorized withdrawals from the company and mischaracterized the withdrawals in SEC filings as salary, prepayments, or loans, the SEC said.

An SEC spokesman said by phone that the federal Privacy Act prevented him from disclosing whether Kandelapas has remitted the $860,000 he was ordered to pay.

Kandelapas pleaded guilty in June 2019 to a single felony count of securities fraud and was sentenced in January 2021 to one day in prison and two years of supervised release.

Broward County Official Records show that Matthew Mushlin and his wife Amanda sold their Idlewyld condominium in June 2019 after moving to St. Louis, Missouri. Mushlin now runs his own real estate company in the city.

Wellness Center, LLC, remains listed as an active company on the penny stock exchange. On Friday, the company’s stock was trading at 4.1 cents a share, down from a high of $2 in mid-2012.