The Securities and Exchange Commission today announced fraud charges and an emergency asset freeze against a purported fund manager based in the U.S. Virgin Islands who 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 invested in investment 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 percent. Spitzer instead used money raised from new investors to pay earlier investors, and misappropriated investor funds to pay unrelated business expenses. He concealed his 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.
“Daniel Spitzer ran an elaborate Ponzi scheme that he disguised by moving investor money through a complex network of foreign bank and brokerage accounts,” said Merri Jo Gillette, Director of the SEC’s Chicago Regional Office. “He deceived investors into believing that he was using a sophisticated investment strategy that didn’t really exist.”
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According to the SEC’s complaint, filed in U.S. District Court for the Northern District of Illinois, Spitzer conducted his fraudulent scheme, which involved 400 investors, from at least 2004 to present. He only invested approximately $30 million of the more than $105 million he raised from investors. Of that amount, Spitzer used approximately $13.5 million to invest through an offshore entity via a bank account in the Netherlands Antilles. These investments, some of which were placed in a French financial institution, lost money and were subsequently liquidated. Spitzer used another $16 million to invest in money market funds that earned only a few thousand dollars. Spitzer liquidated these investments as well. After the investments were liquidated, the money was returned to Spitzer, and he used it to repay investors in Ponzi-like fashion. To cover up his scheme, Spitzer issued to his investors false Schedule K-1s that showed inflated returns and led them to believe that their investments were profitable.
Read the rest here.
Full SEC’s complaint is embedded below.