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Wednesday, June 27, 2012

Fake New Jersey Hedge Fund Manager Indicted for Defrauding Victims in Two Scams


Defendant Allegedly Drained Elderly Victim’s Savings While Operating Separate, $4 Million Foreign Currency Investment Ponzi Scheme

NEWARK—A Newark grand jury today indicted a man for allegedly draining an elderly woman’s annuity while operating another, multi-million-dollar investment fraud scam, U.S. Attorney Paul J. Fishman announced today.

George Sepero, 39, of Glen Rock, New Jersey, allegedly claimed to run New Jersey-based hedge funds using a secret computer program to invest in foreign currency—but instead defrauded victims out of more than $4 million and spent the investments on high-end vehicles, luxury travel, and five-figure bar tabs. In a separate scheme, Sepero allegedly defrauded an elderly woman with serious medical problems out of her life’s savings.

The 17-count indictment charges Sepero with one count of wire fraud conspiracy and 16 counts of wire fraud. Sepero was previously charged by complaint with one count of wire fraud conspiracy. He will be arraigned on the charges in federal court on a date to be determined.

According to the indictment returned today:

Beginning in 2009, Sepero and his co-conspirators claimed to run a series of hedge funds in New Jersey, luring investors with the prospect of extraordinary profits in foreign currency trading. Sepero and others made numerous misrepresentations and omissions to induce their victims to invest in Pelt Capital, Caxton Capital Management, SP Investors Inc., and CCP Pro Consulting Inc. They claimed they 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of more than 170 percent in the prior two years, and that any investment funds would be highly liquid and could be withdrawn on a days’ notice.

Relying on these and other misrepresentations, investors sent the defendant and co-conspirators a total of more than $4 million. Sepero and others invested little 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 others spent investor money on credit card bills averaging approximately $25,000 per month; bar tabs of approximately $18,241—including a $4,000 tip—at Drai’s Hollywood nightclub in Los Angeles; luxury hotel rooms for tens of thousands of dollars, including suites costing more than $4,000 at W Hotels in New York; and flights to Paris, Los Angeles, Chicago, and elsewhere. Sepero also purchased a customized Ford F-350 Harley-Davidson Edition pickup truck costing more than $80,000 and a Mini Cooper automobile and leased a BMW. Sepero also spent victims’ money on other personal expenditures, including mortgage payments, home improvements, meals at high-end restaurants, jewelry, and limousines.

Sepero and others furthered the scheme by e-mailing victims fake statements showing that 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 the conspirators’ invention.

Sepero and others 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 co-conspirators to dupe investors.

In the second scheme, Sepero became acquainted with an elderly woman from New Jersey with serious medical ailments. Sepero took charge of her annuity account and convinced her to write checks to entities that Sepero controlled. Sepero promised to add the money to the annuity account but instead spent hundreds of thousands of dollars for his personal use.

Sepero perpetuated this fraud by opening accounts in the names of the victim’s family members without their authorization or consent. He also made numerous phone calls to the financial institution administering the annuity account, impersonating either the victim’s son or the victim’s late husband. To hide his fraudulent activity, Sepero delivered to the victim’s family a wholly fraudulent statement for the annuity account, which reflected a value of over $750,000 in the annuity account. At the time Sepero created the fake account statement, the annuity was actually worth $16.57.

The wire fraud conspiracy count and each of the 16 wire fraud counts with which Sepero is charged carry a maximum potential penalty of 20 years in prison and a fine of $250,000, or twice the gain or loss from the offense.

U.S. Attorney Fishman credited special agents of the FBI, under the direction of Special Agent in Charge Michael B. Ward in Newark, with the investigations. 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.

The charges and allegations contained in the indictment are merely accusations, and Sepero is considered innocent unless and until proven guilty.

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.

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