Chief Executive Officer Of ACI Capital Group Pleads Guilty
Defendant Pleads Guilty To Using Manhattan-Based Investment Advisory Firm To Steal Over One Million Dollars Of Clients’ Money And Lying To The SEC
BROOKLYN, NY – Fredrick Douglas Scott, 29, waived indictment and pleaded guilty earlier today to a two-count information which charged him with engaging in a wire fraud conspiracy to steal over $1 million from investors, and lying to officials from the Securities and Exchange Commission (“SEC”) who were conducting a regulatory examination of ACI Capital Group LLC (“ACI”). Scott was the Chief Executive Officer of ACI, an investment advisor registered with the SEC since July 2011. As set forth in court filings, to implement his scheme, Scott lied to potential investors to induce them to wire funds to one of ACI’s bank accounts, which funds Scott then stole. To date, investigators have identified over $1 million in investor losses caused by Scott. Scott faces up to 20 years’ imprisonment on the fraud charge and five years’ imprisonment on the false statement charge. Scott also faces a fine equal to double the investors’ losses, mandatory restitution of $1,338,770 to the victims, and forfeiture of assets.
The guilty plea was announced by Loretta E. Lynch, United States Attorney for the Eastern District of New York, and George Venizelos, Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office.
“Today, Fredrick Douglas Scott admitted that he used ACI Capital to steal his clients’ investments and fund his own lavish lifestyle. Rather than the historic figure he presented to the media, Scott stands revealed as a common thief, who lied his way into his investors’ pockets and then continued his web of lies when confronted by the SEC. Scott has now been brought to justice for lying, cheating and stealing for his own personal financial gain,” stated United States Attorney Lynch. “We remain committed to protecting the public by rooting out fraud in the investment industry. I would like to thank the Securities and Exchange Commission, Division of Enforcement in New York, for its assistance in this case. I would also like to recognize the hard work and dedication of our partners at the FBI for their swift action and effective work on this important investigation.”
According to documents filed in this case, ACI was founded by Scott in 2009, and purported to be an investment banking and advisory firm with an office located at 477 Madison Avenue, New York, New York. ACI registered as an investment advisor with the SEC in July
2011 and, according to its most recent regulatory filing, claimed to manage $3.7 billion in assets. While Scott touted his bona fides as an investor to potential clients, including distributing the May 2010 issue of Ebony magazine, which described him as “the youngest African American hedge fund founder in history,” in reality, Scott used ACI to execute his fraudulent scheme, causing over a million dollars in losses.
In connection with his scheme, Scott worked with intermediaries or finders to locate potential victims. Once potential victims were identified, Scott promised those victims a high rate of return for providing short-term financing to businesses purportedly associated with ACI. Once victims wired money to ACI, Scott stole the funds for his personal use. Bank records show that Scott used client funds to finance his personal lifestyle, purchasing personal items at establishments including Louis Vuitton, the Apple Store, Starbucks, Fair Bail Bonds, True Religion Jeans, Tao Restaurant, the Hampton Inn SoHo, and Dizzy's Coca-Cola Club, among others. Bank records also show that Scott wired stolen client funds directly into his personal checking account.
This prosecution was the result of efforts 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 is 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. For more information on the task force, visit http://www.StopFraud.gov.
The government’s case is being prosecuted by Assistant United States Attorney James P. Loonam.
FREDRICK DOUGLAS SCOTT
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