United States Attorney Anne M. Tompkins
Western District of North Carolina
Defendant Operated $8.9 Million Ponzi Scheme Through Hedge Fund
CHARLOTTE, N.C. – Stephen E. Maiden, 40, of Charlotte, has pleaded guilty to securities fraud for carrying out an $8.9 million Ponzi scheme, announced Anne M. Tompkins, U.S. Attorney for the Western District of North Carolina. Maiden entered his guilty plea this morning before U.S. Magistrate Judge David C. Keesler.
Joining U.S. Attorney Tompkins in making today’s announcement is John A. Strong, Special Agent in Charge of the Federal Bureau of Investigation (FBI), Charlotte Division.
A criminal bill of information filed on February 21, 2013, charged Maiden with conducting a Ponzi scheme through his hedge fund Maiden Capital Opportunity Fund (Maiden Capital) which was based in Charlotte. According to the bill of information, Maiden formed his hedge fund in October 2006 and touted his past educational and professional experience, which included stints at Chase Securities, Inc. as an investment banker and Mangan & McColl Partners as an investment analyst, to attract investors from Charlotte and elsewhere.
Based on information in court documents and court proceedings, beginning in at least February 2009, Maiden routinely transmitted bogus account statements to victims and to Maiden Capital’s fund administrator which falsely reported favorable returns both monthly and from the fund’s inception. For example, in June 2011, Maiden transmitted a bogus account statement which reported an estimated monthly net return of 1.3% and a 56 month inception-to-date net return of 81.3%. The account statement noted that in the same 30 month time period, the Russell 2000 and S&P 500 had gains of 24.5% and 11.3% respectively. In truth and fact, according to the charging document, Maiden completely fabricated these returns and by February 2009 had lost the majority of the fund’s assets in failed investments. To keep the scheme going, Maiden used money from new investors to satisfy withdrawal requests made by other fund investors, falsely characterizing the transactions as payments from Maiden Capital’s successful operations. As a result of his conduct, Maiden caused a total loss to victims of at least $8.9 million.
Maiden pleaded guilty to one count of securities fraud and was released on bond. He faces a maximum of 20 years in prison and a $250,000 fine, or both. Maiden has agreed to pay restitution the amount of which will be determined by the Court at sentencing. A sentencing date for the defendant has not been set yet.
The investigation was handled by the FBI. The prosecutions were handled by Assistant United States Attorney Mark T. Odulio, of the U.S. Attorney’s Office in Charlotte.
This matter relates to the work of Charlotte’s Securities Fraud Task Force, a group made up of the FBI, the securities division of the N.C. Secretary of State’s office, the N.C. Attorney General’s Office, the IRS criminal division, the U.S. Postal Inspection Service, the Mecklenburg County District Attorney’s Office, the Securities and Exchange Commission, and the U.S. Attorney’s Office. The multi-agency Task Force promotes collaboration between the agencies in the fight against corporate fraud, insider trading, accounting fraud, market manipulation schemes, and other finance-related crimes.