New York (HedgeCo.Net) – An investigation into hedge fund fraud that was initiated from a SAR resulted in guilty pleas, forfeiture, and in the case of the ringleader, a lengthy prison sentence.
In the course of the investigation, more than $400,000 in victims’ funds were recovered and seized from bank accounts. Another $100,000 was seized from brokerage accounts. Investigators identified accounts overseas, including European countries known for their private banking services to non-residents. The lead defendant received a prison sentence of more than 15 years and was ordered to forfeit more than $20 million to be used for restitution to victims of the fraud.
The operatives used data mining software to collect information from public sources, including individuals’ and businesses’ names, addresses and phone numbers. The data collected was then entered into a spreadsheet and used to make calls to potential investors.
Once investment funds were received via wire, the funds were transferred among several accounts controlled by the defendant and his co-conspirators. The funds were ultimately spent on personal and business expenses in furtherance of the fraud. Very few stocks were actually purchased with the funds. Investors who attempted to cash out their investments were instead persuaded to wire additional funds to meet fictitious withdrawal thresholds and subsequently lost even more money. The total estimated loss was approximately $21 million from over 800 foreign investors.
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