Investment Pool Manager Pleads Guilty to Defrauding Investors in Multi-million Dollar Ponzi Scheme
Loss to Investors Exceeds $8.9 Million
Earlier today, in federal court in Brooklyn, Michael C. Regan, an investment pool manager based in Massachusetts, pleaded guilty to a felony count of securities fraud in connection with a Ponzi scheme to defraud investors in the River Stream Fund of $8.9 million. The guilty plea proceedings were held before United States Magistrate Judge Lois Bloom. When sentenced, the defendant faces a maximum statutory sentence of 20 years’ incarceration, a fine of $5,000,000 and an order requiring the payment of restitution to all of the victims of his crimes.
The guilty plea was announced by Benton J. Campbell, United States Attorney for the Eastern District of New York, and Ronald J. Verrochio, Inspector-in-Charge, New York Division, United States Postal Inspection Service.
According to the charging information, Regan was the sole manager of the River Stream Fund, which had more than 70 investors and which, Regan claimed before the fund’s April 2008 collapse, more than $18 million under management. Starting in or about 2001, Regan gave investors fraudulent account statements showing that the fund had annual returns of approximately twenty percent. River Stream actually lost money or achieved minimal returns from 2001 through April 2008. Regan paid more than $9 million in redemption requests to investors by using new investor funds and took more than $2.5 million in performance fees from River Stream even though he never achieved the minimum twelve percent annual return required for him to be entitled to the fees. By the time River Stream collapsed, it had only $101,600 under management instead of the $18 million Regan reported to his investors. The total cumulative investor losses exceed $8.9 million.
“Investment advisors who breach their clients’ trust and commit criminal acts in order to line their own pockets should be on notice that we will aggressively investigate and prosecute them,” stated United States Attorney Campbell. Mr. Campbell thanked the United States Securities & Exchange Commission for its assistance.
Postal Inspector-in-Charge Verrochio stated, “One key ingredient for investors is trust in the system and those who manage their funds. The Postal Inspectors, along with the SEC and the U.S. Attorney’s Office, are committed to prosecuting those who take advantage of this special trust to further their own financial gains.”
In a related action today, the United States Securities & Exchange Commission filed civil charges against Regan in federal court in Manhattan.
The government’s criminal case is being prosecuted by Assistant United States Attorney James McMahon.
MICHAEL C. REGAN
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