Ponzi Scheme misappropriated $105 million from 400 investors

June 30th, 2010
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The Securities and Exchange Commission has charged Daniel Spitzer with the perpetration of a $105 million Ponzi scheme and has since obtained a court order for an emergency asset freeze against the fund manager and his companies. According to the, Mr. Spitzer, a resident of the U.S. Virgin Islands, has operated the scam since at least 2004 and raised more than $105 million from over 400 investors. Mr. Spitzer lured investors into the scheme by boasting that his funds always produced profitable returns - including over 180% one year - and never lost money. He claimed to invest the funds primarily in foreign currency, when in reality he used the majority of the $105 million to pay off older investors and cover unrelated business expenses.

The SEC claims that Mr. Spitzer only invested $30 million of the total funds he raised, $13.5 million of which he invested through a bank in the Netherlands Antilles. These investments were liquidated after losing money along with an additional $16 million invested in money market funds that didn’t earn more than a few thousand dollars. Spitzer further “deposited investor funds into bank accounts at the National Bank of Anguilla and the First Bank of Puerto Rico, from which he paid more than $15 million in purported operating expenses and payments to himself and various sales agents,” the SEC stated. To cover up the Ponzi scheme and his own personal misappropriations, Mr. Spitzer provided his investors with false Schedule K-1s with inflated returns.

The SEC further claims that Mr. Spitzer’s attempts to avoid and delay investor redemption payments pushed the Ponzi scheme to the verge of collapse, prompting the SEC to request an emergency asset freeze from the court.

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