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New Jersey man indicted in white collar crime

A New Jersey man was recently charged with 17 counts of wire fraud and conspiracy in a white collar crime. Federal prosecutors report that his hedge fund may have defrauded investors up to $4 million dollars.

In a typical Ponzi scheme, returns are paid to existing investors out of new investment principal, rather than from profits. This pyramid structure can survive only as long as the flow of incoming cash from new investors isn't overwhelmed by withdrawals by old investors. Investors are usually recruited with promises of high short-term returns. New investor money may also be used to make payments to older investors to give the illusion that the investment is successful.

In this case, the man is charged with promising triple-digit returns to investors using a special algorithmic trading system. In reality, no such system existed. The man is alleged to have sent fake statements to clients and emailed them screenshots of the fabricated computer trading program. The man allegedly used the actual investment capital to fund an extravagant lifestyle and to repay previous Ponzi scheme investors.

The U.S. Department of Justice has made white collar crimes one of its priorities, creating the Interagency Financial Fraud Enforcement Task Force in 2009 to better coordinate federal enforcement and regulatory efforts. It cautions investors to proceed carefully when a fund promises unusually high short-term returns.

The flipside of that effort, however, is overzealous prosecution. Aggressive prosecutors may attempt to bring charges against any business or individual connected to an alleged fraudulent scheme. In such event, you need an attorney to protect your rights -- and your presumption of innocence -- until prosecutors have met their burden of proof under applicable law.

Source: FINalternatives, "N.J. Man Hit With Ponzi Scheme Charges" June 29, 2012

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