Manhattan Business Owner Sentenced in Manhattan Federal Court to 46 Months in Prison for His Participation in a $2.9 Million Ponzi Scheme
Preet Bharara, the United States Attorney for the Southern District of New York, announced that Jason Konior, the founder and manager of a number of related business entities in New York City, collectively referred to as Absolute, was sentenced yesterday in Manhattan federal court to 46 months in prison for his participation in a Ponzi scheme. Konior previously pled guilty on July 9, 2013, to one count of wire fraud for his role in stealing at least $2.9 million from small hedge fund investors and using the funds to pay off prior investors and to pay himself. He was sentenced yesterday by U.S. District Judge Alvin K. Hellerstein.
According to the Information, statements made during Konior’s sentencing proceeding yesterday and his guilty plea on July 9, 2013, and a complaint previously unsealed in Manhattan federal court:
From late 2011 through May 2012, Konior organized and managed a Ponzi scheme in which he misappropriated at least $2.9 million in funds he had solicited from hedge fund investors. He represented to these hedge funds that Absolute would provide additional trading funds of up to nine times the investment they made in Absolute. As part of Absolute’s “first loss” investment program, Konior claimed that he would place the combined funds—the investors’ funds and the additional funds to be provided by Absolute—in a brokerage account designated by Absolute. According to Konior, the hedge fund investors would then be able to trade securities utilizing that brokerage account. Under the arrangement, the hedge funds would be responsible for trading losses, and they would share any profits with Absolute.
Instead of establishing brokerage accounts for the victim hedge funds, Konior misappropriated the funds they provided by paying redemptions to prior investors, making payments to himself, and paying various personal and business expenses. In e-mails, text messages, and telephone conversations, Konior pretended that he was establishing brokerage accounts for the three hedge fund investors, when he had already stolen their money. In one case, after he repeatedly failed to set up a brokerage account for one of the hedge funds, the manager of the fund sent him a text message stating, “I want my money back. What did you do to it anyway? Are you going to tell me or do you want the SEC to find out?” Konior responded with a text message that said, “[w]e have your funds in our acct. Where else would they be?” At the time he wrote the message, he had already used that hedge fund’s investment to pay off other investors and his own expenses.
In addition to the prison term, Judge Hellerstein sentenced Konior, 40, of New York, New York, to three years of supervised release. Konior was also ordered to forfeit $2.9 million and to pay a $2.9 million fine.
Mr. Bharara praised the work of the Federal Bureau of Investigation and the Securities and Exchange Commission.
Today’s announcement is part of efforts underway by President Obama’s Financial Fraud Enforcement Task Force (FFETF), which was created in November 2009 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. Since the inception of FFETF in November 2009, the Justice Department has filed more than 12,841 financial fraud cases against nearly 18,737 defendants including nearly 3,500 mortgage fraud defendants. For more information on the task force, visit www.stopfraud.gov.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys John T. Zach and Jason H. Cowley are in charge of the prosecution.