Florida Businessman Sentenced In Manhattan Federal Court To 11 Years In Prison In Connection With $13 Million Fraud Scheme Involving Phony Facebook And Groupon Stock
Preet Bharara, the United States Attorney for the Southern District of New York, announced today that JOHN A. MATTERA was sentenced in Manhattan federal court to 11 years in prison for his role in a $13 million scheme to defraud investors through false ownership claims of stock in Facebook, Inc. (“Facebook”) and Groupon, Inc. (“Groupon”) before their initial public offerings, and in other private companies. MATTERA pled guilty to securities fraud and wire fraud charges in October 2012, and he agreed to pay restitution to the victims of his offense and consented to the entry of a $13 million forfeiture order. MATTERA was sentenced today by U.S. District Judge Richard J. Sullivan.
Manhattan U.S. Attorney Preet Bharara stated: “John Mattera enjoyed a lavish lifestyle, funded by approximately $13 million he procured from investors with false promises of profit from high-profile stocks. He then took millions for dollars for himself. Today’s sentence ensures he will pay a substantial price for his fraud.”
According to the charging instruments filed in this case and statements made during court proceedings:
In 2010 and 2011, MATTERA served as Chairman of the Advisory Board of Praetorian Global Fund Ltd. (“Praetorian”), a professional mutual fund, where he was responsible for the day-to-day management decisions. Beginning in the late summer of 2010, MATTERA and others offered investors the opportunity to invest in special purpose entities related to Praetorian (the “G Power Entities”). MATTERA falsely represented that the G Power Entities owned shares in companies such as Facebook and Groupon when they were still private. Ownership of stock in these private companies was particularly attractive to certain investors because, as MATTERA and others communicated, there was an expectation that initial public offerings would soon occur, thereby potentially increasing the value of the shares. In reality, neither MATTERA, Praetorian, nor the G Power Entities held these shares of stock.
Based on the misrepresentations of MATTERA and others, investors sent more than $11 million into “escrow accounts” maintained at a Florida bank. MATTERA reassured investors that their money would be held in the escrow accounts until either the offering was completed or another triggering event took place. Investors were told they would then receive their ownership interest in the particular special purpose entity. However, instead of maintaining the investor money in the escrow accounts as MATTERA promised, MATTERA caused the vast majority of the funds to be transferred to other entities with which he was associated. Ultimately, MATTERA misappropriated approximately $13 million of investor money, spending nearly $4 million on personal items for himself and his family, such as expensive jewelry, interior decorating, and luxury cars.
In addition to the prison term, Judge Sullivan sentenced MATTERA, 51, of Boca Raton, Florida, to three years of supervised release. MATTERA was also ordered to forfeit $11.8 million and pay restitution to be determined, as well as a $400 special assessment fee.
Mr. Bharara praised the work of the Criminal Investigators of the United States Attorney’s Office and the Internal Revenue Service, Criminal Investigation, which jointly investigated this case. He also thanked the U.S. Securities and Exchange Commission.
This case was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force, on which Mr. Bharara serves as a Co-Chair of the Securities and Commodities Fraud Working Group. The task force was established to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. attorneys’ offices and state and local partners, it’s the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations. Over the past three fiscal years, the Justice Department has filed nearly 10,000 financial fraud cases against nearly 15,000 defendants including more than 2,900 mortgage fraud defendants. For more information on the task force, please visit www.StopFraud.gov.
Assistant United States Attorneys Eugene Ingoglia, David Miller, and Paul Monteloni are in charge of the prosecution.