Bergen County Man Sentenced to 33 Months in Prison for His Role in $3.5 Million Foreign Currency Investment Ponzi Scheme
|U.S. Attorney’s Office November 01, 2013|
CAMDEN, NJ—A Bergen County, New Jersey man claiming to run New Jersey-based hedge funds using a secret computer program to invest in foreign currency was sentenced today to 33 months in prison for his role in defrauding victims of more than $3.5 million, U.S. Attorney Paul J. Fishman announced.
Carmelo Provenzano, 31, of Garfield, New Jersey, and co-conspirator Daniel Dragan, 43, of Lebanon, New Jersey, previously pleaded guilty to separate informations charging them with wire fraud conspiracy before U.S. District Judge Jerome B. Simandle in Camden federal court. A third co-conspirator, George Sepero, 40, of Glen Rock, New Jersey, previously pleaded guilty to a superseding information charging him with wire fraud conspiracy, wire fraud, and tax evasion before Judge Simandle.
Dragan will be sentenced in December 2013. Sepero was sentenced to 100 months in prison on October 18, 2013.
According to documents filed in this and other cases and statements made in court:
Beginning in 2009, Dragan, Provenzano, and Sepero claimed to run a series of hedge funds in New Jersey, luring investors with the prospect of extraordinary profits in foreign currency trading. The defendants made numerous misrepresentations and omissions to induce their victims to invest in Caxton Capital Management and CCP Pro Consulting Inc. Dragan, Provenzano, and Sepero claimed they controlled a proprietary computer algorithm for trading foreign currencies; that they had used the algorithm to achieve returns of more than 170 percent in the prior two years; and that any investment funds would be highly liquid and could be withdrawn on a few days’ notice.
Relying on these and other misrepresentations, investors sent the defendants more than $3.5 million. Dragan, Provenzano, and Sepero invested little or no money in foreign currency or any other investment vehicle, instead diverting the vast majority of victims’ investments to pay prior victims in Ponzi-scheme style and to finance extravagant personal expenditures.
Dragan, Provenzano, and Sepero spent investor money on credit card bills averaging $25,000 per month; bar tabs of $18,241—including a $4,000 tip—and $14,034 on separate nights at Drai’s Hollywood nightclub in Los Angeles; and flights to Paris and elsewhere. Provenzano bought a luxury Range Rover Sport SUV costing more than $71,000 with a down payment of more than $65,000.
The defendants furthered the scheme by emailing victims fake statements showing their principal had been invested in the foreign currency markets and was achieving substantial results. Many of these e-mails were purportedly sent by an individual named “Mel Tannenbaum,” a fictional character of Provenzano’s invention.
The defendants also e-mailed to several investors screen shots of a computer-based trading program, which they claimed represented the investors’ funds being traded in the currency markets. In reality, the shots reflected trading in fictional accounts set up by the conspirators to dupe investors.
In addition to the prison term, Judge Simandle sentenced Provenzano to serve three years of supervised release and ordered him to pay restitution of $4,508,949.
U.S. Attorney Fishman credited special agents of the FBI, under the direction of Special Agent in Charge Aaron T. Ford in Newark, for the investigation leading to today’s sentence. He also thanked the Commodity Futures Trading Commission’s New York Regional Office, under the direction of David Meister.
The government is represented by Assistant U.S. Attorneys Christopher Kelly and Zach Intrater of the U.S. Attorney’s Office Economic Crimes Unit and Evan Weitz of the Office’s Asset Forfeiture Unit in Newark.
This case was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force. The task force was established to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. attorneys’ offices, and state and local partners, it is the broadest coalition of law enforcement, investigatory, and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state, and local authorities; addressing discrimination in the lending and financial markets; and conducting outreach to the public, victims, financial institutions, and other organizations. Over the past three fiscal years, the Justice Department has filed nearly 10,000 financial fraud cases against nearly 15,000 defendants including more than 2,900 mortgage fraud defendants. For more information on the task force, please visit www.stopfraud.gov.