Florida Resident Sentenced to 33 Months in Prison for Securities and Investment Fraud Scheme
|U.S. Attorney’s Office March 04, 2013|
NEWARK—Scott Kupersmith, formerly of Alpine, New Jersey, and now living in Marco Island, Florida, was sentenced to 33 months in prison for engaging in a sophisticated securities and investment fraud scheme, U.S. Attorney Paul J. Fishman announced.
Kupersmith, 46, previously pleaded guilty before U.S. Magistrate Judge Patty Shwartz in Newark federal court to an information charging him with securities fraud. U.S. District Judge Katharine S. Hayden imposed the sentence in Newark federal court.
According to documents filed in the case and statements made in court:
Kupersmith engaged in a securities fraud scheme commonly referred to as “free-riding,” in which a customer buys or sells securities in a brokerage account without the cash or securities to cover the trades. Kupersmith and his associates opened more than half a dozen brokerage accounts at brokerage firms located in New Jersey and across the country. To induce the brokerage firms to open these accounts, Kupersmith falsely represented that he had a personal net worth of approximately $5 million and that he controlled a hedge fund in Manhattan with assets worth more than $10 million. Once these accounts were opened, Kupersmith used them to make millions of dollars’ worth of securities trades. When the trades were successful, Kupersmith kept the profits. When the trades were not profitable, Kupersmith would walk away from the trades, leaving the brokerage firms to settle the trades on Kupersmith’s behalf. The brokerage firms collectively sustained $1 million in losses.
Kupersmith funded the scheme, in part, with money that he solicited from investors. He falsely represented to them that he ran a successful Manhattan hedge fund that had an annual return of about 30 percent and promised investors grossly unrealistic returns.
In addition to a prison term, Judge Shwartz sentenced Kupersmith to three years of supervised release and fined him $1.8 million.
U.S. Attorney Fishman credited special agents of the FBI, under the direction of Acting Special Agent in Charge David Velazquez in Newark, for the investigation leading to today’s sentence. He also thanked the U.S. Securities and Exchange Commission’s Division of Enforcement in New York for its assistance.
The government is represented by Assistant U.S. Attorney Christopher J. Kelly of the U.S. Attorney’s Office Economic Crimes Unit in Newark.
This case was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force. President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch and, with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.