Bergen County Man Admits Role in Two Separate Fraud Schemes
Ran Multi-Million-Dollar Ponzi Scheme; Swindled Eldery, Disabled Widow
|U.S. Attorney’s Office March 01, 2013|
NEWARK—A Bergen County, New Jersey man who claimed to run New Jersey-based hedge funds using a secret computer program to invest in foreign currency admitted today he defrauded victims of millions of dollars; defrauded an elderly, disabled widow of her life savings; and evaded payment of taxes, U.S. Attorney Paul J. Fishman announced.
George Sepero, 40, of Glen Rock, New Jersey, pleaded guilty to a superseding information charging him with wire fraud conspiracy, wire fraud, and tax evasion before U.S. District Judge Jerome B. Simandle in Camden federal court. Two conspirators, Carmelo Provenzano and Daniel Dragan, previously pleaded guilty before Judge Simandle.
According to documents filed in this case and statements made in court:
Beginning in 2009, Sepero, Dragan, and Provenzano claimed to run a series of hedge funds in New Jersey, luring investors with the prospect of extraordinary profits in foreign currency trading. The defendants made numerous misrepresentations and omissions to induce their victims to invest in “Caxton Capital Management” and “CCP Pro Consulting Inc.” Sepero claimed that he and his conspirators owned and controlled a proprietary computer algorithm for trading foreign currencies; that they had used the algorithm to achieve returns of more than 170 percent in the prior two years; and that any investment funds would be highly liquid and could be withdrawn on days’ notice.
Investors sent the defendants a total of more than $3.5 million. Sepero and the others invested little or no money in foreign currency or any other investment vehicle, instead diverting the vast majority of victims’ investments to pay prior victims in Ponzi-scheme style and to finance extravagant personal expenditures.
Sepero and his co-conspirators spent investor money on credit card bills averaging $25,000 per month; bar tabs of $18,241, including a $4,000 tip; $14,034 on separate nights at Drai’s Hollywood” nightclub in Los Angeles; and flights to Paris and elsewhere. Sepero bought a custom Ford pickup truck costing more than $80,000.
The defendants e-mailed victims fake statements showing their principal had been invested in the foreign currency markets and was achieving substantial results. Many of these e-mails were purportedly sent by an individual named “Mel Tannenbaum,” a fictional character of Provenzano’s invention.
The defendants also e-mailed to several investors “screen shots” of a computer-based trading program, which they claimed represented the investors’ funds being traded in the currency markets. In reality, the shots reflected trading in fictional accounts set up by the conspirators to dupe investors.
The wire fraud conspiracy count to which Sepero pleaded is punishable by a maximum potential penalty of 20 years in prison and a fine of $250,000 or twice the gain or loss from the offense. Sentencing is scheduled for June 14, 2013.
Sepero also pleaded guilty to conducting a wholly separate fraud scheme:
Sepero worked as a financial planner at a financial institution for several years but was fired in 2006 because of investigations into his churning of clients’ accounts. One of his clients was an elderly, demented, paraplegic woman with the initials M.V. Sepero took control of M.V.’s annuity account, which was the sole means that M.V. had to provide for her retirement and nursing expenses.
Notwithstanding his termination from the financial institution, Sepero lied to M.V. and her family and told them that he was still authorized to manage the annuity account. When M.V. had money to add to the annuity account, M.V.—at Sepero’s direction—handed it over to Sepero, with checks made payable not to the administrator of the account but rather to Sepero’s company “Casa Nostra Enterprises.” Instead of transferring the money to the annuity account, however, Sepero spent it on his own expenses: credit card and other bills, mortgage payments, and car payments, among other things.
To hide the fraud, Sepero fabricated a bogus account statement, showing that the annuity account was worth more than $700,000, when, for the period covered by the bogus statement, the annuity account actually contained $16.57.
Sepero placed recorded phone calls to the administrator of the annuity account, during which he impersonated both M.V.’s son and her husband, who had been dead for more than three years at the time Sepero made the calls.
Sepero also pleaded guilty to tax evasion for the tax year 2010, as he derived income from his fraudulent activities, but did not file a tax return and deposited his victims’ money into his companies’ accounts.
U.S. Attorney Fishman credited special agents of the FBI, under the direction of Acting Special Agent in Charge David Velazquez in Newark, and special agents of IRS-Criminal Investigation, under the direction of Acting Special Agent in Charge Shantelle P. Kitchen, for the investigation leading to today’s guilty plea. He also thanked the Commodity Futures Trading Commission’s New York Regional Office, under the direction of David Meister.
The government is represented by Assistant U.S. Attorneys Christopher Kelly and Zach Intrater of the U.S. Attorney’s Office Economic Crimes Unit and Evan Weitz of the Office’s Asset Forfeiture Unit in Newark.
This case was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force. President Obama established the interagency Financial Fraud Enforcement 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.