U.S. Halts Two Ponzi Schemes in Wake of Madoff

The U.S. government took action Thursday to halt two Ponzi schemes as investors continue to reel from the fallout of accused swindler Bernard Madoff’s alleged $50 billion fraud.

Securities and futures regulators charged a Philadelphia-area fund manager with operating a $50 million Ponzi fraud, in which he paid off early investors with money from later investors, officials said.

In a separate case, authorities charged an 82-year-old man with allegedly running a $17 million Ponzi scheme where he targeted the elderly and members of the Catholic community, including priests, religious orders and cemetery funds.

The charges come about a month after Madoff was arrested for allegedly swindling billions from investors, banks and charities. The Securities and Exchange Commission has been criticized for failing to detect Madoff’s alleged fraud.

On Thursday, the SEC and the Commodity Futures Trading Commission alleged that 53-year-old Joseph S. Forte reported consistent returns to his investors even though he consistently lost money, withdrew millions of dollars in fees for personal use, and used investor funds to repay other investors.

Forte claimed he was a successful commodity futures trader and that his fund had a successful track record, the CFTC said. He was never registered with the SEC, nor was his fund registered with the CFTC. The SEC said it has obtained an emergency court order freezing Forte’s assets.

According to the government complaints, Forte conducted the Ponzi scheme since at least February 1995 and solicited about $50 million from as many as 80 investors, including at least one charity, to participate in a commodity futures pool.

The SEC complaint said that late last month, Forte admitted to federal authorities that he had been conducting the Ponzi scheme and that he did not have the funds to repay investors.

Forte admitted that he misrepresented and falsified Forte LP’s trading performance from the very first quarter and arbitrarily selected the percentage of gains that he would report to investors, the complaint said.

From 1995 through Sept. 30, 2008, Forte reported annual returns as high as 37.96 percent. However, from January 1998 through October 2008, the Forte LP trading account had net trading losses of about $3.3 million, the SEC said.

Regulators said efforts are underway to account for and locate funds. Attempts to reach Forte were not successful.

Separately, the SEC and the Department of Justice charged 82-year-old Richard Piccoli with running an alleged Ponzi scheme using his companies, Gen See Capital Corp. and Gen Unlimited. Piccoli advertised almost exclusively in Catholic newspapers, authorities said.

According to the complaints, the New York resident promised investors a guaranteed annual return of 7.1 percent for a $5,000 investment, with a higher rate of return for larger investments. However, Piccoli did not invest the funds and instead used investor funds to make payments owed to other investors, authorities said.

The SEC is seeking a court order to freeze Piccoli and Gen See’s assets. Attempts to reach Piccoli were not successful.

(Reporting by Rachelle Younglai; Editing by Tim Dobbyn, John Wallace, Richard Chang)

Topics USA