A Long Island financial advisor was arrested today for running a Ponzi scheme to cover up hundreds of thousands of dollars in trading losses. Defendant Paul Sullivan was charged in a criminal complaint with wire fraud. The defendant’s initial appearance is scheduled this afternoon before United States Magistrate Judge Lois Bloom at the U.S. Courthouse, 225 Cadman Plaza East, Brooklyn, New York.
The charges were announced by Loretta E. Lynch, United States Attorney for the Eastern District of New York; James T. Hayes, Jr., Special Agent-in-Charge, U.S. Immigration and Customs Enforcement (ICE), Homeland Security Investigations (HSI), New York; Ronald J. Verrochio, Inspector-in-Charge, U.S. Postal Inspection Service, New York Division; and Toni Weirauch, Acting Special Agent-in-Charge, Internal Revenue Service, New York.
As alleged in the complaint, Sullivan made investments without his clients’ authorization that resulted in significant losses. When these losses were discovered, Sullivan admitted his misconduct and attempted to prevent the clients from alerting the authorities by promising to reimburse them for their losses. In order to obtain the money for reimbursement, Sullivan proceeded to misappropriate funds belonging to a second group of clients by encouraging them to send checks to the first group. Sullivan falsely characterized these payments as “private investment opportunities.” The complaint sets forth a pattern of such conduct victimizing seven clients in the amount of more than $300,000 over a period of over three years.
As detailed in the complaint, one victim-client and the client’s spouse confronted Sullivan at meetings in the client’s home. The client, who was acting at the direction of law enforcement authorities, recorded the meetings using a hidden video camera. During these meetings, Sullivan admitted that he had used the client’s funds to repay another client’s investment losses, stating, “what I did was completely illegal, completely wrong ... everything I’ve done was wrong, was illegal, I have nothing to say.”
“As part of a pattern of fraud and deception, Sullivan allegedly abandoned his fiduciary obligations to his clients and made unauthorized investments with their funds. When confronted by his victims, he continued his lies and put his own twist on ‘borrowing from Peter to pay Paul’ by manipulating a second set of victims into a Ponzi scheme designed to cover those investment losses,” stated United States Attorney Lynch. “He will now be held to account for his crimes.”
“Sullivan allegedly abused the trust his clients placed in him by making unauthorized investments and, to make matters worse, concocted his version of a Ponzi scheme to cover the losses of those initial clients while subjecting new clients to the same unacceptable level of risk,” said HSI Special Agent-in-Charge Hayes. “HSI’s El Dorado Task Force works to maintain the integrity of our financial institutions and systems and protect consumers from individuals who seek to profit through this type of fraud.”
Postal Inspector-in-Charge Verrochio stated, “As alleged in the complaint, this case highlights another example of dishonest business practices overcoming the best interests of investors. Postal Inspectors are vigilant in protecting consumers from individuals who defraud the public through phoney investment scams.”
IRS Acting Special Agent-in-Charge Weirauch stated, “As detailed in the complaint, this investigation provides another illustration of what a Ponzi scheme operator might do in order to prevent further detection or notification of the authorities. If you feel the person or company you invest with does not provide you with satisfactory explanations or the information you are entitled to, and you suspect you are being defrauded, you should not hesitate to bring the matter to law enforcement.”
The charge in the complaint is merely an allegation, and the defendant is presumed innocent unless and until proven guilty. If convicted, Sullivan faces a maximum sentence of 20 years’ imprisonment.
The government’s case is being prosecuted by Assistant United States Attorney Daniel Spector.
This case was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force. President Obama established the interagency 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.
The Defendant:
Name: PAUL SULLIVAN
Age: 47
Residence: New Hyde Park, New York
The charges were announced by Loretta E. Lynch, United States Attorney for the Eastern District of New York; James T. Hayes, Jr., Special Agent-in-Charge, U.S. Immigration and Customs Enforcement (ICE), Homeland Security Investigations (HSI), New York; Ronald J. Verrochio, Inspector-in-Charge, U.S. Postal Inspection Service, New York Division; and Toni Weirauch, Acting Special Agent-in-Charge, Internal Revenue Service, New York.
As alleged in the complaint, Sullivan made investments without his clients’ authorization that resulted in significant losses. When these losses were discovered, Sullivan admitted his misconduct and attempted to prevent the clients from alerting the authorities by promising to reimburse them for their losses. In order to obtain the money for reimbursement, Sullivan proceeded to misappropriate funds belonging to a second group of clients by encouraging them to send checks to the first group. Sullivan falsely characterized these payments as “private investment opportunities.” The complaint sets forth a pattern of such conduct victimizing seven clients in the amount of more than $300,000 over a period of over three years.
As detailed in the complaint, one victim-client and the client’s spouse confronted Sullivan at meetings in the client’s home. The client, who was acting at the direction of law enforcement authorities, recorded the meetings using a hidden video camera. During these meetings, Sullivan admitted that he had used the client’s funds to repay another client’s investment losses, stating, “what I did was completely illegal, completely wrong ... everything I’ve done was wrong, was illegal, I have nothing to say.”
“As part of a pattern of fraud and deception, Sullivan allegedly abandoned his fiduciary obligations to his clients and made unauthorized investments with their funds. When confronted by his victims, he continued his lies and put his own twist on ‘borrowing from Peter to pay Paul’ by manipulating a second set of victims into a Ponzi scheme designed to cover those investment losses,” stated United States Attorney Lynch. “He will now be held to account for his crimes.”
“Sullivan allegedly abused the trust his clients placed in him by making unauthorized investments and, to make matters worse, concocted his version of a Ponzi scheme to cover the losses of those initial clients while subjecting new clients to the same unacceptable level of risk,” said HSI Special Agent-in-Charge Hayes. “HSI’s El Dorado Task Force works to maintain the integrity of our financial institutions and systems and protect consumers from individuals who seek to profit through this type of fraud.”
Postal Inspector-in-Charge Verrochio stated, “As alleged in the complaint, this case highlights another example of dishonest business practices overcoming the best interests of investors. Postal Inspectors are vigilant in protecting consumers from individuals who defraud the public through phoney investment scams.”
IRS Acting Special Agent-in-Charge Weirauch stated, “As detailed in the complaint, this investigation provides another illustration of what a Ponzi scheme operator might do in order to prevent further detection or notification of the authorities. If you feel the person or company you invest with does not provide you with satisfactory explanations or the information you are entitled to, and you suspect you are being defrauded, you should not hesitate to bring the matter to law enforcement.”
The charge in the complaint is merely an allegation, and the defendant is presumed innocent unless and until proven guilty. If convicted, Sullivan faces a maximum sentence of 20 years’ imprisonment.
The government’s case is being prosecuted by Assistant United States Attorney Daniel Spector.
This case was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force. President Obama established the interagency 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.
The Defendant:
Name: PAUL SULLIVAN
Age: 47
Residence: New Hyde Park, New York
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