Liquor Entrepreneur Arrested For Defrauding Investors

Audrey Strauss, the United States Attorney for the Southern District of New York, and William F. Sweeney Jr., the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”) announced that JOSEPH CIMINO, the founder of an Orange County-based tequila company, was arrested this morning and charged with securities fraud and wire fraud arising out of his fraudulent solicitation of investments for the company.  CIMINO will be presented before United States Magistrate Judge Judith C. McCarthy in White Plains federal court later today.

U.S. Attorney Audrey Strauss said:  “Joseph Cimino allegedly raised nearly $1 million in investor funds for his start-up tequila company by lying about the company’s finances, and then spent a significant portion of that money to finance his own lifestyle.  Now Cimino faces the sobering reality of federal securities and wire fraud charges.”

FBI Assistant Director William F. Sweeney Jr. said:  “Through falsely inflating capital, misleading investors, and lying about other aspects of his tequila company, Cimino, as alleged, raised nearly $1 million in furtherance of his fraudulent scheme.  While his alleged illegal activity continued over a period of four years, today’s arrest has effectively shattered any hopes he may have had of continuing to scam innocent investors.”

According to the allegations contained in the Complaint[1] unsealed today in White Plains federal court:

From 2014 to 2018, CIMINO raised approximately $935,000 from at least 25 investors ostensibly to fund a tequila company that he founded (the “Tequila Company”).  Throughout this period CIMINO made numerous false and misleading representations in an effort to attract and maintain investors.  For example, in multiple communications with prospective investors, CIMINO falsely inflated the amount of capital that the Tequila Company had raised from other investors, and falsely represented that certain individuals were investors in the Tequila Company, when in reality they had not invested any funds.  CIMINO also fabricated or falsely inflated the Tequila Company’s sales in a number of investor communications.  In December 2015, CIMINO made statements in an email to a prospective investor falsely implying that the Tequila Company already had sales, when in fact, the company’s initial sales did not occur until 2017.  In July 2017, CIMINO falsely represented in an investor report and quarterly profit and loss (“P&L”) statement that the Tequila Company’s year-to-date sales totaled 3,410 cases, when its actual sales totaled only 350 cases.  Then, in October 2017, CIMINO falsely represented that the Tequila Company’s year-to-date sales totaled 6,035 cases, when its actual year-to-date sales totaled barely 20 percent of that number.  CIMINO further claimed to investors in October 2017 that the Tequila Company would receive reimbursement for 800 cases of tequila that were supposedly destroyed at a distributor’s warehouse in Puerto Rico as a result of Hurricane Maria.  That statement was a fabrication.  In reality, the Tequila Company had no insurance and none of its inventory had been destroyed in the hurricane.

In addition to deceiving investors about the Tequila’s Company’s financial condition, CIMINO used investor money for personal expenses, including groceries, pet supplies, and personal entertainment.  From 2014 to 2018, CIMINO transferred approximately $472,000 of investor money from the Tequila Company into his personal bank account, and used a significant portion of those deposits for personal living expenses, contrary to the operating agreements provided to investors.

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CIMINO, age 56, of Warwick, New York, is charged with one count of securities fraud and one count of wire fraud.  Each charge carries a maximum sentence of 20 years in prison. 

The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by a judge.

Ms. Strauss praised the investigative work of the FBI Hudson Valley White Collar Crime Task Force and Orange County Sheriff’s Office.  Ms. Strauss also thanked the Securities & Exchange Commission for its assistance in the investigation.

In a related case, the Securities & Exchange Commission brought a civil action today against CIMINO in U.S. District Court in White Plains.

The criminal case is being prosecuted by the Office’s White Plains Division.  Assistant U.S. Attorneys Benjamin Gianforti and Daniel Loss are in charge of the prosecution.