Manhattan U.S. Attorney And FBI Assistant Director-In-Charge Announce Arrests Of Chief Executive Officer And President Of Investment Fund For Perpetrating Multi-Million Dollar Fraud Scheme
Preet Bharara, the United States Attorney for the Southern District of New York, and George Venizelos, the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), today announced the arrests of ABDUL WALJI and RENIERO FRANCISCO, the Chief Executive Officer and President, respectively, of Arista LLC (“Arista”), a California – based investment fund, in connection with a six-count Criminal Complaint charging them with defrauding their investors and misappropriating millions of dollars. From 2010 through 2011, WALJI and FRANCISCO allegedly solicited numerous investors for the fund by misrepresenting its nature and performance, issued fraudulent account statements to investors to cover up massive losses, and misappropriated at least $2.7 million of investor funds for their own personal use. WALJI and FRANCISCO were arrested by the FBI this morning at their residences in California, and will be presented in federal court in the Central District of California, Santa Ana branch, this afternoon.
Manhattan U.S. Attorney Preet Bharara stated: “As alleged, Abdul Walji and Reniero Francisco managed what was more investment fraud than investment fund – luring unsuspecting clients into investing only to divert millions to themselves, wiping out some of their clients’ entire life savings. When hiring investment advisers, people are entitled to expect they will act in the client's best interests, but investors also need to be vigilant because even the records they receive may be falsified.”
FBI Assistant Director-in-Charge George Venizelos: “The defendants allegedly conned dozens of investors with false promises. Instead of investing their savings in the risk-free securities claimed, the defendants put investors’ money in highly speculative investments – if they invested it at all. They took money under false pretenses, and lied about the performance of their clients’ portfolios. The FBI is determined to protect the public by rooting out unscrupulous money managers.”
According to the allegations in the Complaint unsealed today in Manhattan federal court:
Arista began operations as an investment firm in February 2010, with its principal place of business in Newport Coast, California. On April 20, 2011, Arista became a registered commodity pool operator (“CPO”) with the United States Commodity Futures Trading Commission (“CFTC”), and a member of the National Futures Association (“NFA”).
In early 2010, WALJI and FRANCISCO began to solicit individuals to invest in Arista. In connection with those efforts, FRANCISCO solicited and recruited several of his former clients from the large broker-dealership at which he previously worked. Several of FRANCISCO’s former clients contributed large portions of their savings, including their retirement savings, for an investment in Arista. WALJI and FRANCISCO collected nearly $10 million from over 35 investors, of which only approximately $7.5 million was invested in S&P 500 future contracts and United States Treasury Bond options.
From February 2010 through December 2011, WALJI and FRANCISCO carried out their fraudulent scheme through three methods. First, WALJI and FRANCISCO misrepresented to several Arista investors the nature of the firm’s investments and the returns that investors would receive from investing in Arista. For example, WALJI and FRANCISCO falsely told investors that their money would be invested in safe, risk-free securities, while, in fact, much of the money was invested in options and futures. Second, WALJI and FRANCISCO caused fraudulent account performance statements to be sent to Arista investors that misrepresented the value of the investors’ investments with Arista. Specifically, in an effort to secure additional contributions from investors, at times when investors were losing money they had already invested, WALJI and FRANCISCO concealed Arista’s trading losses, and misrepresented that the investors were profiting from their investments. Third, WALJI and FRANCISCO misappropriated at least approximately $2.7 million from Arista’s investors that they diverted for their own personal benefit.
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WALJI, 60, of San Juan Capistrano, California, and FRANCISCO, 56, of Newport Coast, California, are both charged in the Complaint with conspiracy to commit securities fraud and wire fraud (Count One), securities fraud (Count Two), and wire fraud (Counts Four through Six). WALJI is also charged separately with commodities fraud (Count Three). The securities fraud and wire fraud charges each carry a maximum term of 20 years in prison; the commodities fraud charge carries a maximum term of 10 years in prison; and the conspiracy charge carries a maximum term of five years in prison.
Mr. Bharara praised the investigative work of the FBI and also thanked the CFTC for its assistance.
This case was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force, on which Mr. Bharara serves as a Co-Chair of the Securities and Commodities Fraud Working Group. President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorney David I. Miller is in charge of the prosecution. Assistant U.S. Attorney Paul Monteleoni is in charge of the asset forfeiture related to the prosecution.
The charges contained in the Complaint are merely accusations, and the defendants are presumed innocent unless and until proven guilty.