Investment Advisor Arrested and Charged with Wire Fraud for Stealing Millions of Dollars from a Client
A criminal complaint was unsealed this morning in federal court in Brooklyn charging Edward T. Stein, an investment advisor based in Roslyn, New York, for his role in defrauding one of his clients of over $6.5 million.1 The defendant’s initial appearance is scheduled to be held later today before United States Magistrate Judge Joan M. Azrack, at the U.S. Courthouse 225 Cadman Plaza East, Brooklyn, New York.
The charges were announced by Benton J. Campbell, United States Attorney for the Eastern District of New York, and Joseph M. Demarest, Jr., Assistant Director-in-Charge of the Federal Bureau of Investigation, New York Field Office.
As alleged in the complaint, Stein induced one of his clients to wire transfer $3 million to bank accounts that Stein controlled based on his false representation that he would invest the funds in annuities on the client’s behalf. Thereafter, Stein repeatedly assured the client and the client’s attorney that he had purchased the annuities, when, in fact, he had not. Instead, Stein used this money for other purposes, including transferring money to his own personal accounts and to bank accounts belonging to individuals believed to be investors in funds controlled by the defendant.
The complaint also alleges that Stein stole approximately $1.5 million from the same client’s account at Ameritrade Advisors, which the client had deposited so that Stein could make an investment on the client’s behalf. Stein allegedly forged the client’s signature on seven wire transfer authorizations and caused Ameritrade Advisors to wire the funds to bank accounts controlled by Stein, by Stein’s attorney, and by an individual who invested in a fund controlled by Stein. In addition, the complaint alleges that Stein stole $2 million that the client entrusted to him for the purpose of making an investment on the client’s behalf.
“This defendant blatantly stole millions of dollars from a client and will now face serious charges,” stated United States Attorney Campbell. “We will aggressively pursue and prosecute investment advisors who breach their clients’ trust and commit criminal acts.” Mr. Campbell thanked the United States Securities & Exchange Commission for its assistance and added that the investigation is continuing.
FBI Assistant Director-in-Charge Demarest stated, “To say that the defendant, in his role as an investment adviser, breached a fiduciary responsibility to his client puts too fine a gloss on the matter. Simply stated, he stole his client’s money, repeatedly lied about it, and committed forgery to steal more. The FBI is determined to root out investment fraud of every sort.”
If convicted of wire fraud, Stein faces a maximum sentence of 30 years’ imprisonment.
The United States Securities & Exchange Commission announced today that it has filed civil charges against Stein. In its action, filed in federal court in Manhattan, the SEC alleges that since 1992, Stein has operated a Ponzi scheme, moving more than $55 million through the accounts of his investment funds, Gemini and DISP, and selling interests in those entities to more than 80 investors. The SEC complaint further alleges that Stein made material misrepresentations and omissions to induce individuals to invest in Gemini and DISP and then used their money as needed to pay off older investors and to fund his personal expenses.
The government’s criminal case is being prosecuted by Assistant United States Attorneys Scott Klugman, Winston Paes, and Claire Kedeshian.
EDWARD T. STEIN
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