Two men running a fake hedge fund scheme have been charged in New Jersey for the alleged $3.5 million fraud.
The men, George Sepero and Carmelo Provenzano, claimed to run Jersey based hedge funds using a secret computer program to invest in foreign currency were charged for defrauding victims and spending the investments on high-end vehicles, luxury travel, and five-figure bar tabs.
Sepero and Provenzano were arrested two weeks ago by FBI special agents on a criminal Complaint charging them with wire fraud conspiracy.
According to the Complaint Sepero and Provenzano claimed to run a series of hedge funds in New Jersey beginning in 2009. The men lured 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 “Pelt Capital,” “Caxton Capital Management,” “SP Investors Inc.,” and “CCP Pro Consulting, Inc.”
Sepero and Provenzano 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of more than 170 percent in the prior two years; and that any investment funds would be highly liquid and could be withdrawn on days’ notice.
Relying on these and other misrepresentations, investors sent the defendants a total of more than $3.5 million. Sepero and Provenzano 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 Provenzano spent investor money on credit card bills averaging approximately $25,000 per month; bar tabs of approximately $18,241 – including a $4,000 tip – and approximately $14,034 on separate nights 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 Provenzano bought a luxury Range Rover Sport SUV costing more than $71,000, with a down payment of over $65,000. The pair also spent victims’ money on other personal expenditures, including mortgage payments, home improvements, meals at high-end restaurants, jewelry and limousines.
The defendants furthered the scheme by emailing 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 coconspirators to dupe investors.
The wire fraud conspiracy count with which Sepero and Provenzano are charged carries 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 Paul Fishman states, “Nobody asks to be defrauded, but those looking to invest should always be skeptical of rates of return that go so far beyond the norm” – Source.
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