Demuzio Pleads Guilty to Wire Fraud
Admits Misappropriating and Losing $805,273 of Investor Money
POCATELLO – Brad Lee Demuzio, 35, of Chubbuck, Idaho, pled guilty in United States District Court today to one count of wire fraud, U.S. Attorney Wendy J. Olson announced. Demuzio was indicted by a federal grand jury in Boise on April 10, 2012.
According to the plea agreement, in or about December 2007, the defendant formed Demuzio Capital Management LLC for the purpose of trading in foreign currency markets. Subsequently, he entered into partnership agreements with friends, family, and others. The agreements provided that the investors would make cash contributions to the partnership, for the purpose of generating a return on the investment by the defendant trading in the foreign currency markets, and the defendant and the investors would share equally in the profits and losses. From 2008 to 2011, the defendant solicited and received approximately $1.8 million in capital investments from approximately 16 investors.
However, contrary to the representations in the partnership agreements with the investors, the defendant did not invest all of their capital contributions in the foreign currency markets. Rather, he used a large portion of the contributions to pay personal expenses -- including home mortgage payments, retail shopping, groceries, and gas -- and to repay the contributions of prior investors. Further, of the sums he did invest in the foreign currency markets, the defendant lost significant amounts. To conceal his losses, beginning in 2010, the defendant sent investors false email updates. The emails misrepresented that the defendant was earning significant returns.
In or about June and July 2011, two investors requested that the defendant return their principal. After bouncing checks to the investors, the defendant represented that he could not provide the funds because he was under investigation by the United States Commodity Futures Trading Commission (CFTC) and the CFTC had frozen his assets. The defendant provided the investors with two letters referencing the investigation, bearing the CFTC seal, and purportedly signed by its Deputy General Counsel. Later, the defendant provided the investors with a purported “Order of Dismissal” of the investigation from an Administrative Law Judge, also bearing the CFTC seal. The defendant forged each of the three documents and provided them without the knowledge and authorization of the CFTC Deputy General Counsel and Administrative Law Judge. The plea agreement contains
The plea agreement contains a forfeiture provision. Demuzio admits he misappropriated and lost $805,273 of investor money.
Each count of wire fraud is punishable by up to 20 years in prison, a maximum fine of $250,000 or twice the gain or loss from the offense, and up to three years of supervised release.
The case was investigated by the Federal Bureau of Investigation and the CFTC.
Demuzio and his company, Demuzio Capital Management, LLC, are charged by the U.S. Commodity Futures Trading Commission in a civil complaint with operating a fraudulent $1.8 million commodity pool and foreign currency Ponzi scheme.
“Mr. Demuzio preyed upon the financial hopes of others, falsely promising returns when he knew he would use his victims’ money for personal expenses,” said Olson. “Today’s plea ensures that Mr. Demuzio will answer to the Court and to his victims.”
Today's announcement is part of efforts underway by President Obama's Financial Fraud Enforcement Task Force (FFETF) which was created in November 2009 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 more than 10,000 financial fraud cases against nearly 15,000 defendants including more than 2,700 mortgage fraud defendants. For more information on the task force, visit www.stopfraud.gov.
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