The Cornerstone Report: Volume 4, Issue 2
European Investors Scammed
ICE initiated an investigation based on suspicious financial wire transfers through businesses owned and operated by the main target of this investigation, (herein referred to as “Target”), who was purported to be operating hedge funds and financial advisement firms, which catered to wealthy European citizens outside of the United States.
Financial analysis revealed that the Target’s account activity involved hundreds of incoming wire transfers from overseas accounts to domestic accounts held in the name of businesses controlled by the Target that were purportedly being used to purchase stocks in the United States market. The funds were then wired among several other business accounts controlled by Target and then ultimately used to pay personal expenses and business expenses in furtherance of the scheme.
The Target utilized his hedge fund consulting agencies to sponsor European individuals seeking work in the United States. The Target applied for immigration status for his workers and utilized them as boiler-room operators. These individuals would then contact wealthy European citizens through a cold-calling technique and entice them to purportedly purchase stocks in the United States market. Once the funds were received via wire, they were transferred among several accounts controlled by Target and his co-conspirators. The funds were ultimately spent on personal and business expenses in furtherance of the fraud. Very few stocks were actually purchased with the funds. The Target instructed his workers on how to use deceptive measures and blatant lies to extract more money from the unsuspecting investors. Some investors lost in excess of one million dollars in an attempt to recoup investments they believe were locked up in the United States stock market.
In June 2006, the Target and several co-conspirators were arrested on a complaint filed in the Southern District of New York and charged with conspiracy to commit securities, mail, and wire fraud under Title 18 USC 371. The Target and another defendant are currently awaiting trial. One co-conspirator pleaded guilty to the conspiracy charge and to a substantive count of securities fraud, 15 USC 78j (b) and 78 ff and is awaiting sentencing while another considers a plea agreement. The remaining defendant is a fugitive from justice.
Investigation determined that in a six-year span, Target and his co-conspirators defrauded approximately 800 victim investors out of approximately $21 million. These numbers may be higher due to the fact that Target has been involved in this scheme for approximately twelve years in Europe and the United States. Approximately $700,000 in victim’s funds have been recovered and seized from bank accounts and an additional $300,000 is being held in trade accounts. A lis pendens was also filed on a multi-million dollar residence that was purchased with victim funds.
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Red Flag Indicators
 Use of multiple business accounts to conduct financial transactions inconsistent with normal activity for stated business.
Source of money for business is different from the source listed in the business profile filed with the bank (business profile claimed the money would come from hedge funds when in actuality all the money came from individuals).
Main conspirator purported to be investing in the stock market but neither he nor his business had any certifications or license to buy or sell stocks.
Conspirators had over 40 bank accounts at 10 different financial institutions. Many of the accounts utilized the same or similar names and addresses.
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