Offshore

SEC Halts $105 Million Virgin Islands Ponzi Scheme

Nick Parmee 30 June 2010

SEC Halts $105 Million Virgin Islands Ponzi Scheme

The Securities and Exchange Commission has brought fraud charges and an emergency asset freeze against a purported fund manager based in the US 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.

Spitzer in fact used money raised from new investors to pay earlier investors and misappropriated investor funds to pay unrelated business expenses. The SEC has obtained an emergency court order freezing the assets of Spitzer and his companies.

Spitzer conducted his fraudulent scheme, which involved 400 investors, from at least 2004 to the present. He only invested approximately $30 million of the more than $105 million he raised from investors.

The SEC’s complaint also alleges that Spitzer used offshore bank accounts to pay purported business expenses of his companies. He paid more than $15 million in purported operating expenses and payments to himself and various sales agents. Spitzer also used more than $4.8 million to pay third-party business expenses. The SEC further alleges that Spitzer led an extravagant lifestyle and spent more than $900,000 at a Las Vegas casino.

According to the SEC’s complaint, Spitzer’s scheme is on the verge of collapse as he has attempted to delay and avoid paying investor redemptions.

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