New Jersey Man Arrested and Charged in Manhattan Federal Court with Securities Fraud
Preet Bharara, the United States Attorney for the Southern District of New York, and Diego Rodriguez, the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced today that WILLIAM J. WELLS was arrested this morning on securities fraud and wire fraud charges stemming from his scheme to defraud more than 30 investors of more than $1.5 million through a fraud scheme.
Among other false and misleading statements, WELLS lied to prospective and existing investors by representing, including in fictitious account statements, that he had achieved consistently positive trading returns, when in fact, WELLS’s trading was remarkably unsuccessful and he realized trading losses every year since 2009. Of the money WELLS did not lose in securities trading, WELLS routinely converted investor funds to his own use to pay personal expenses, and he used new investor funds to pay back other investors in a Ponzi-like fashion.
WELLS is expected to be presented today in federal court in Manhattan before United States Magistrate Judge Michael H. Dolinger.
U.S. Attorney Preet Bharara said: “As alleged, William Wells repeatedly lied to his investors, falsely claiming consistently positive returns, when in fact his trading was spectacularly unsuccessful. But his alleged lies did not stop there. He also allegedly used investor money to pay personal expenses, including for private school tuition, and used new investor money to pay back old investors.”
FBI Assistant Director-in-Charge Diego Rodriguez said: “As alleged, Wells didn’t run an investment firm, he ran a Ponzi scheme totaling more than $1.5 million from potential investors. Wells allegedly used the funds to pay some investors to hide his trading losses and to support his personal lifestyle. The FBI is committed to investigating and bringing to justice those who prey upon trusting individuals for their own personal gain.”
According to the Complaint unsealed today in Manhattan federal court1:
From September 2009 through the present, WELLS, through his investment firm Promitor Capital LLC (“Promitor Capital”), engaged in a fraudulent scheme to obtain investments by falsely representing that he had achieved consistently positive trading returns in the U.S. equity markets, including through the successful use of options to hedge risk. In truth, WELLS’s trading was remarkably unsuccessful. Between 2009 and the present, WELLS realized trading losses every year and, in total, trading losses in excess of $500,000. In fact, as of September 2015, Promitor Capital had less than $1,000 under management.
In connection with the scheme, WELLS made a series of false and misleading representations to investors, including: (a) that WELLS’s trading was generating consistently positive returns when, in fact, his trading was consistently unsuccessful; (b) that investors were invested in certain stocks at certain times when, in fact, none of the accounts held by Promitor or WELLS held those stocks; and (c) that WELLS had created so-called sub-accounts for clients, for which WELLS purported to execute individualized trading strategies, when, in fact, no such sub-accounts were ever funded. In addition to false and misleading representations made orally and in writing, WELLS also generated wholly fictitious account statements that he provided to his clients.
As a result of these misrepresentations, WELLS obtained more than $1.5 million in investments from more than 30 investors, many of whom were friends, colleagues, or family members. Of the money he did not lose in securities trading, WELLS routinely converted investor funds to his own use in the form of cash withdrawals and to pay personal expenses, including more than $500,000 for, among other things, credit card bills, payments for WELLS’s car, and for private school tuition. In addition, to hide his trading losses and continue to fund his personal lifestyle, WELLS used new investor funds to pay back other investors. In total, WELLS distributed less than approximately $500,000 back to investors.
WELLS, 42, was arrested this morning in Valley Cottage, New York. He is charged with one count of securities fraud and one count of wire fraud. The securities fraud count and the wire fraud count each carry a maximum sentence of 20 years in prison and the charges carry a maximum fine of $5 million, or twice the gross gain or loss from the offense. The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.
Mr. Bharara praised the work of the FBI, and thanked the U.S. Securities and Exchange Commission for its assistance. He added that the investigation is continuing.
The charges were brought in connection with the President’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. Since fiscal year 2009, the Justice Department has filed over 18,000 financial fraud cases against more than 25,000 defendants. For more information on the task force, please visit www.StopFraud.gov.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorney Andrea M. Griswold in charge of the prosecution.
The allegations contained in the Complaint are merely accusations, and the defendant is presumed innocent unless and until proven guilty.
1As the introductory phrase signifies, the entirety of the text of the Complaint, and the description of the Complaint set forth herein, constitute only allegations, and every fact described should be treated as an allegation.