Investment Adviser Sentenced to 97 Months in Ponzi Scheme

A 56 year-old Farmington Hills, Michigan investment adviser was sentenced today in federal court to 97 months in prison for running a $4 million Ponzi scheme, United States Attorney Barbara L. McQuade announced. Joining in the announcement was Andrew G. Arena, Special Agent in Charge of the Federal Bureau of Investigation.

Keith Epstein was sentenced today by the Honorable Nancy G. Edmunds, following his April 2011 guilty plea to bank fraud charges. In addition to his incarceration, Judge Edmunds ordered that Epstein pay restitution to his victims in the amount of $4.1 million.

According to court documents, Epstein devised a scheme where he directed clients—many of whom were elderly—to liquidate legitimate investments in order to purportedly place them in new, less risky instruments, with him. Epstein then diverted these funds for his own use, where he spent it gambling and at adult entertainment clubs, financially supporting multiple exotic dancers, and making “interest” payments to other investors to continue the scheme. Epstein was able to convince his clients to provide him with their funds in this manner by ingratiating himself to them in numerous ways. He regularly visited his clients at home, shared his personal life with them, attended family functions (such as birthdays and weddings) in which he provided gifts, put money towards charitable causes important to clients, and assisted some clients with life decisions (such as the purchase of a home). Victim losses exceed $4 million. Many of his victims’ retirement funds have been completely eviscerated, leaving them with nothing after lifetimes of saving and hard work.

“We hope to send a message to investment advisors that we will aggressively prosecute those who steal from the elderly and other small investors,” McQuade said.

This case was investigated by agents of the Federal Bureau of Investigation and was prosecuted by Assistant United States Attorney Erin Shaw.