Hedge Fund Portfolio Manager Pleads Guilty to Securities Fraud
Primary Source of Investor Money Came from Individual Retirement Accounts
|U.S. Attorney’s Office December 15, 2011|
Ward Onsa, the portfolio manager of New Century Hedge Fund Partners, LP, pleaded guilty today to securities fraud after soliciting more than $5 million as part of an investor Ponzi scheme. Onsa entered his plea before the Hon. Dora L. Irizarry, United States District Judge, at the United States Courthouse in Brooklyn.
The guilty plea was announced by Loretta E. Lynch, United States Attorney for the Eastern District of New York, and Janice K. Fedarcyk, Assistant Director in Charge, Federal Bureau of Investigation, New York Field Office.
According to the indictment, the defendant operated the investment firm Ward Onsa & Company until 2005 when a series of trading losses and default judgments bankrupted the entity. Thereafter, Onsa organized the New Century Hedge Fund and, between 2005 and 2010, solicited and received over $5 million in investor funds, primarily from Individual Retirement Accounts. Onsa told the investors that their retirement funds would be used to purchase securities, futures contracts and options designed to profit when the Dow Jones Industrial Average reached 10,748. Onsa’s trading theory was that the market would not go above this level. As the market surged past 10,748, however, the investments that the defendant made with his investors’ retirement money plummeted into insolvency.
While the investors were losing their money, the defendant funneled money from the Fund to himself and the defunct Ward Onsa & Company. Onsa further agreed to loan his early investors in New Century $2.6 million from newer investors’ money. Instead of disclosing the losses, the payments to Ward Onsa & Company or the $2.6 million loan, Onsa issued fake statements to investors showing consistent and steady earnings in the market. Onsa continued to solicit additional money from investors through 2010 and used that new capital to pay back the losses of the early investors.
“Retirement accounts represent hard earned dollars set aside for an uncertain future. Through a web of lies and deceit, the defendant targeted those funds to line his own pockets and prop up his failed investments. The defendant’s criminal decision to tap investors’ IRA accounts as part of his Ponzi scheme reaffirms this Office’s resolve to vigorously investigate and prosecute fraud in the securities and commodities markets,” stated United States Attorney Lynch.
FBI Assistant Director in Charge Fedarcyk stated, “The defendant continued to solicit investors by showing fictitious gains, both while the fund was losing money and after he had ceased to invest at all. Luring new investors to pay off earlier ones is the classic Ponzi.”
The defendant faces a maximum sentence of 20 years’ imprisonment on the securities fraud charge.
The government’s case was prosecuted by Assistant United States Attorney Patrick Sean Sinclair.
This case was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force. President Obama established the interagency 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.