United States Attorney for the Southern District of New York, Jay Clayton, announced on Mar. 17 that Christopher B. Ferguson and Brian McFadden pleaded guilty to falsifying books, records, and accounts related to Edison Nation, Inc., a publicly traded consumer products company. Ferguson was the CEO and chairman of Edison Nation, while McFadden served as a consultant. The pleas were entered before U.S. District Judge Colleen McMahon, with Ferguson pleading guilty on January 28 and McFadden on March 16.
The case centers around false documentation submitted by Edison Nation in response to an inquiry from the Financial Industry Regulatory Authority (FINRA). The issue arose after Edison Nation issued a press release in April 2020 claiming it had received over $10 million in orders for personal protective equipment during the COVID-19 pandemic. However, two days before the press release was issued, a potential buyer withdrew from a $9 million hand sanitizer purchase, meaning the company did not actually have those orders at the time.
According to court documents and statements made in court, Ferguson and McFadden caused Edison Nation to submit falsified purchase orders to FINRA as evidence of these supposed sales. “Edison Nation claimed to have over $10 million in orders,” said U.S. Attorney Jay Clayton. “When FINRA, a self-regulatory organization important to ensuring the integrity of our securities markets, requested documentation to support that, CEO Christopher Ferguson and consultant Brian McFadden caused the company to submit falsified documents. There is no place for that conduct in our markets.”
After FINRA requested supporting documents on April 23, 2020, McFadden asked an associate at another company to create a backdated $9 million purchase order for hand sanitizer. This order was then submitted along with other misleading materials as if it had been received prior to the press release.
Both defendants pleaded guilty to one count of falsification of books, records, and accounts—a charge carrying a maximum sentence of 20 years in prison. Sentencing will be determined by the judge.
Clayton praised the work of federal investigators involved in this case. The prosecution is being handled by Assistant U.S. Attorneys Nicholas W. Chiuchiolo, Maggie Lynaugh, and Samuel P. Rothschild from the Securities and Commodities Fraud Task Force.
