The SEC charged Nevin K. Shapiro, the president and founder of Capitol Investments USA, Inc. and a prominent businessman in Miami Beach, this week with the orchestration of a $900 million Ponzi scheme. According to the SEC’s press release, “Capitol was operating at a loss by late 2004 and had virtually no operations by 2005 when, in a classic Ponzi scheme manner, Shapiro began using funds from new investors to pay principal and interest to earlier investors.”
At $900 million, Nevin Shapiro’s scheme ties him for fifth with last year’s alleged Westgate Capital Management Ponzi Scheme on HedgeTracker’s Hall of Fraud List , which has now reached over $87 billion. While $900 million is a lot money, it’s well below the billions allegedly plundered by Bernie Maddoff’s Madoff Investments LLC, R. Allen Stanford’s Stanford Financial Group and Tom Petters’s Petters-Group-Worldwide.
Mr. Shapiro marketed his securities to investors as risk-free investments, promising rates of return as high as 26% a year. He also “used his business relationships and word-of-mouth to solicit investors and sell them short-term promissory notes.” The SEC alleges that he further provided his investors with falsified and fabricated purchase orders and invoices for Capitol’s grocery diverting business.
Among Mr. Shapiro’s false assurances to investors were promises that “Capitol would not broker the sale of the goods without first obtaining a purchase order from a buyer” and that “Capitol would pay the principal and interest from the profits it received when it resold the goods.” Mr. Shapiro is also alleged to have diverted at least $38 million in investor funds for his own personal gain, including a “$5 million home in Miami Beach, a $1 million boat, luxury cars, expensive clothes, high-stakes gambling, and season tickets to premium sporting events.”
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