Investment Advisor Pleads Guilty to Defrauding Investors in Multi-million Dollar Ponzi Scheme
Loss to Investors Exceeds $30 Million
Earlier today, in federal court in Brooklyn, Edward T. Stein, an investment advisor based in Roslyn, New York, pleaded guilty to a five-count felony information charging him for his role in defrauding his clients in a $30 million Ponzi scheme. The guilty plea proceedings were held before United States Magistrate Judge James Orenstein. Stein faces a maximum statutory sentence of 20 years’ incarceration on the most serious charge, as well as the payment of restitution to the victims of his crimes. In lieu of criminal forfeiture, Stein agreed as part of his plea agreement with the government in this criminal case to cooperate with the receiver appointed in the civil enforcement action filed against him in Manhattan by the Securities & Exchange Commission and to turn over to the receiver all assets identified and/or restrained in that action.
The guilty plea was 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.
During his guilty plea allocution, Stein admitted that between 1998 and 2009, he fraudulently solicited investors to purchase interests in several funds and partnerships he controlled by falsely assuring them that he would make investments on their behalf with the money they provided. Instead, Stein used millions of dollars of this money for other purposes, including making investments in his own name and paying redemptions to other individuals who had invested money with him. Stein also sent fraudulent quarterly account statements and tax documents to many investors which falsely made it appear that the funds and partnerships in which they invested had significant assets when, in fact, they did not.
“We will aggressively pursue and prosecute investment advisors who breach their clients’ trust and commit criminal acts for their own financial gain,” stated United States Attorney Campbell. 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, “As we have said before, investing your money carries risks, but having your money misappropriated by your investment advisor surely ought not to be one of those risks. The FBI remains committed to rooting out investment advisor fraud.”
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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