California Man Pleads Guilty to $80 Million Ponzi Scheme
Leader of Investment Scam Defrauded More Than 300 Investors
|U.S. Attorney’s Office February 01, 2013|
SACRAMENTO, CA—Anthony Vassallo, 33, of Folsom, California, pleaded guilty today for his role in a massive investment fraud scheme that brought in more than $80 million from more than 300 investors, U.S. Attorney Benjamin B. Wagner, FBI Special Agent in Charge Herbert M. Brown, and Internal Revenue Service (IRS) Criminal Investigation (CI) Special Agent in Charge Jose Martinez announced.
This case is the product of an investigation by the FBI and the IRS-CI. Assistant U.S. Attorneys Jean M. Hobler and Lee S. Bickley are prosecuting the case.
“Anthony Vassallo and his co-conspirators lied to hundreds of people and took in more than $80 million based on those lies. Vassallo’s victims came from every walk of life and included his friends and family. This conviction is small consolation to Vassallo’s victims, but a message to anyone who takes advantage of others’ trust—there are extreme consequences for your actions and this office, with its partner agencies, will pursue you until justice is done,” stated U.S. Attorney Wagner.
“The magnitude of Vassallo’s actions against unsuspecting investors for personal gain is intolerable,” said FBI Special Agent in Charge Herbert M. Brown. “The FBI continues to thoroughly investigate greed-motivated financial crimes such as these and is committed to seeking justice for victims.”
“This was a classic Ponzi scheme. Mr. Vassallo preyed on investors with the promise of huge returns with little risk,” said IRS Special Agent in Charge Jose M. Martinez. “IRS-CI is committed to identifying and investigating those who take advantage and impact the financial well-being of others for their own personal financial benefit.”
According to court documents, between April 2006 and March 2009, Vassallo and others operated Equity Investment, Management, and Trading Inc. (EIMT) in Folsom, a hedge fund investment company purporting to use a computer program designed by Vassallo to time the stock market. Vassallo promised investors an annual rate of return of 36 percent with little risk of loss. In fact, Vassallo and others operated EIMT as a Ponzi scheme using new investor funds to make “dividend” payments to previous investors, to make risky investments without investor knowledge or consent, and to fund his lifestyle. Although Vassallo lost the investors’ money and ceased trading in securities in about September 2007, he lulled investors into keeping their funds on deposit through December 2008 by fabricating investment information, forging trading and bank documents, and reporting positive returns. Neither Vassallo nor EIMT was registered with the Securities Exchange Commission (SEC).
Co-conspirator Kenneth Kenitzer, 66, of Pleasanton, California, has previously pleaded guilty in a related case and is awaiting sentencing.
On March 11, 2009, the SEC charged Vassallo and Kenneth Kenitzer with the antifraud provisions of the federal securities laws for their roles in the fraudulent investment scheme. The SEC obtained an injunction and court order against Vassallo and Kenitzer freezing the assets of EIMT. In the SEC action, a receiver has been appointed and has been working to recover assets to give back to Vassallo’s and Kenitzer’s victims.
Vassallo is scheduled to be sentenced by U.S. District Judge Garland E. Burrell, Jr. on May 3, 2013. He faces up to 20 years in prison for wire fraud, with fines up to twice the value of the victims losses and mandatory restitution.
This law enforcement action is part of the work being done by President Barack Obama’s Financial Fraud Enforcement Task Force (FFETF). 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. One component of the FFETF is the national Securities Fraud Working Group, which is tasked with combating investment fraud schemes. For more information on the task force, visit stopfraud.gov.