DOW JONES NEWSWIRES
The Securities and Exchange Commission on Monday announced fraud charges and an emergency asset freeze against a purported fund manager based in the U.S. Virgin Islands who allegedly perpetrated a $105 million Ponzi scheme against investors.
The SEC alleges that Daniel Spitzer, a resident of St. Thomas, used several entities and sales agents to misrepresent to investors that their money would be put in funds that, in turn, would be invested primarily in foreign currency.
Investors were falsely told that Spitzer's funds had never lost money and historically produced profitable annual returns that one year reached over 180%, according to the SEC. Spitzer instead used the funds raised from new investors to pay earlier investors, and misappropriated other funds to pay unrelated business expenses, the SEC said. He allegedly concealed the scheme by issuing phony documents to investors that led them to believe their investments were profiting.
The SEC has obtained an emergency court order freezing the assets of Spitzer and his companies. An investigation into the alleged fraud is ongoing.
The alleged scheme, which took place from at least 2004 to the present, involved 400 investors. Spitzer allegedly only invested about $30 million of the more than $105 million he raised from investors.
The SEC's complaint further alleges that Spitzer used offshore bank accounts to pay purported business expenses to his companies. He also allegedly led an extravagant lifestyle and spent more than $900,000 at a Las Vegas casino.
According to the complaint, Spitzer's scheme is "on the verge of collapse" as he has attempted to delay and avoid paying investor redemptions. As recently as March, Spitzer obtained $100,000 from an investor for an investment in one of his purportedly more conservative funds. Rather than invest the money, Spitzer allegedly used a portion of the money in April to pay other investors and third-party expenses.
Attempts to reach Spitzer were unsuccessful.
In a typical Ponzi scheme, funds from new investors are used to pay "profits" to earlier investors. Since Bernard Madoff admitted running a massive Ponzi scheme that involved billions of dollars late in 2008, dozens of similar, smaller cases have been brought to light.
Copyright 2009 Dow Jones Newswires
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