States Attorney's Office District of Connecticut
|September 13, 2010||
FORMER WETHERSFIELD RESIDENT ADMITS OPERATING $100 MILLION PONZI SCHEME
David B. Fein, United States Attorney for the District of Connecticut, and Kimberly K. Mertz, Special Agent in Charge of the New Haven Division of the Federal Bureau of Investigation, announced that MICHAEL S. GOLDBERG, 39, formerly of Wethersfield, waived his right to indictment and pleaded guilty today before United States Magistrate Judge Holly B. Fitzsimmons in Bridgeport to three counts of wire fraud stemming from his operation of a $100 million “Ponzi” scheme that defrauded investors of more than $30 million over an approximately 12-year period.
“For 12 years, this defendant lured hundreds of investors with one false promise after another, the end result being financial misery for many of them,” stated U.S. Attorney Fein. “The U.S. Attorney’s office is committed to investigating financial fraud crimes, seeking appropriate prison terms and securing restitution for victims.”
“Michael Goldberg’s actions have devastated the financial security of hundreds of innocent investors,” stated FBI Special Agent in Charge. “The FBI, along with our law enforcement and regulatory partners will continue to police the actions of those preying upon the investing public.”
According to court documents and statements made in court, from approximately 1997 to November 2009, GOLDBERG devised and executed a scheme to defraud numerous investors by soliciting millions of dollars of funds under false pretenses, failing to invest the investors’ funds as promised, paying existing investors with new investors’ money, and misappropriating and converting investors’ funds to GOLDBERG’s own benefit and the benefit of others without the knowledge or authorization of the investors. Initially, GOLDBERG transacted with investors in his own name. Beginning in September 2005, GOLDBERG received investments through Michael S. Goldberg, LLC, which at times did business as Acquisitions Unlimited Group.
GOLDBERG’s scheme to defraud investors involved principally two different types of misrepresentations. First, GOLDBERG solicited individuals to invest money in “diamond contracts.” In order to induce individuals to invest money, GOLDBERG represented that he would use investors’ money to purchase diamonds at extremely low prices from vendors in New York City, and that he would then resell those diamonds immediately at a substantial profit. GOLDBERG represented that the profits from the resale of the diamonds would enable him to pay investors a 20 to 25 percent return on investment every 60 to 90 days.
However, the vast majority of GOLDBERG’s fraud involved his solicitation of individuals and organizations to invest money in the purchase of distressed assets from JP Morgan Chase Bank (“Chase”). GOLDBERG falsely represented to potential investors in these “Chase asset deals” that Chase had granted him a contractual right to purchase foreclosed and seized business assets from a Chase Foreclosure Manifest, which he would then resell in prearranged transactions to large, well-known corporations. GOLDBERG represented that his purchase and resale of these foreclosed assets would enable him to pay investors a return on capital of up to 20 percent in a short period of time, typically 90 days. In addition, GOLDBERG represented that Chase would refund the purchase price of any asset that could not be resold, and that therefore there was no risk to the investor that any principal investment would be lost.
In order to induce individuals to invest in both diamond contracts and Chase asset deals, GOLDBERG typically drafted and entered into a “Business Investment Agreement Form” with each investor. In these forms, GOLDBERG set out the terms of the investment, including the amount of the return on capital and the date the return was to be paid. In many of the agreements, GOLDBERG indicated that he would be responsible for the payment of all taxes, and also included language explaining the risk-free nature of the investment.
As part of his scheme to defraud the investors, GOLDBERG also compensated other individuals (“feeders”) for locating new investors, primarily in Chase asset deals, through the payment of a “finder’s fee.”
Through this scheme, GOLDBERG induced more than 350 individuals to invest more than $100 million in diamond contracts and Chase asset deals. Certain investors have lost a total of more than $30 million as a result of the scheme.
In pleading guilty today, GOLDBERG admitted that each and every one of his representations were false. Aside from a brief period in 1997, he did not purchase diamonds in New York City or any other location; he did not have any relationship with Chase; he did not purchase any foreclosed and seized assets from Chase; nor did he resell any foreclosed and seized assets. GOLDBERG paid the promised returns to existing investors with funds he received from new investors or reinvested funds. When an investor questioned GOLDBERG about his business relationships, either with Chase or with any other company, he often created false documents and other items to induce investors to believe that his business relationships were legitimate, including inventories and/or manifests, contracts, business checks, bank statements, business cards, and company identification cards. GOLDBERG also created domain names in the names of actual companies, including Chase, that would be listed on false documents in case an investor attempted to verify the authenticity of the documents. In addition, GOLDBERG opened actual bank accounts in the names of the companies to whom he purported to be selling foreclosed business assets, without the permission of those companies, that could also be used to create the false impression that he had a business relationship with the companies.
GOLDBERG is scheduled to be sentenced by United States District Judge Janet C. Hall on December 2, 2010, at which time GOLDBERG faces a maximum term of imprisonment of 60 years. GOLDBERG also will be ordered to pay restitution of at least $30 million. GOLDBERG is involved in two Chapter 7 bankruptcy proceedings that are currently pending the United States Bankruptcy Court in Hartford. A bankruptcy trustee has been appointed for the purpose of paying the creditors of the bankruptcy estate pursuant to orders of the United States Bankruptcy Court. Pursuant to the plea agreement entered into by GOLDBERG, the bankruptcy trustee will be the vehicle through which restitution is made to the victims of GOLDBERG’s scheme.
GOLDBERG voluntary disclosed his scheme to federal authorities in November 2009 and presented a check to the Government consisting of $500,000 of investors’ money. He has been released on a $1 million bond since his arrest on November 23, 2009.
This matter is being investigated by the Federal Bureau of Investigation and is being prosecuted by Assistant United States Attorney David E. Novick.
This law enforcement action is part of the work being done by President Barack Obama’s Financial Fraud Enforcement Task Force. President Obama established the interagency Financial Fraud Enforcement 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. For more information on the task force, visit StopFraud.gov.
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