Jay Clayton, U.S. Attorney for the Southern District of New York | Department of Justice
Christopher B. Ferguson, CEO and chairman of Edison Nation, Inc., and Brian McFadden, a consultant for the company, pled guilty to falsification of books, records, and accounts in federal court, according to a Mar. 17 announcement by United States Attorney for the Southern District of New York Jay Clayton. 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 on false documentation submitted by Edison Nation in response to an inquiry from the Financial Industry Regulatory Authority (FINRA). This matter is significant because it involves misleading information provided to a self-regulatory organization that plays a key role in maintaining the integrity of securities markets.
"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."
According to court documents and statements made during proceedings, after expanding into high-demand products like hand sanitizer and face masks during the COVID-19 pandemic, Edison Nation issued an April 2020 press release stating it had received over $10 million in orders for personal protective equipment. However, two days prior to this announcement, a potential buyer had informed Edison Nation it could not proceed with a $9 million purchase order—meaning such orders did not exist at the time of the press release.
Following FINRA's request for supporting documentation 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 false records as evidence of sales that had not occurred.
Both defendants pled guilty to one count each 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 the Federal Bureau of Investigation and U.S. Securities and Exchange Commission on 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.
