Florida Businessman Pleads Guilty In Manhattan Federal Court In Connection With $13 Million Fraud Scheme Involving Phony Shares Of Facebook And Groupon Stock
Preet Bharara, the United States Attorney for the Southern District of New York, announced today that JOHN A. MATTERA pled guilty in Manhattan federal court to charges of securities fraud, wire fraud, and conspiracy to commit securities fraud and wire fraud in connection with a $13 million scheme to defraud investors through false ownership claims of stock in Facebook, Inc. (“Facebook”) and Groupon, Inc. (“Groupon”) before their initial public offerings, and in other private companies. In connection with his guilty plea, MATTERA agreed to pay restitution to the victims of his offense and consented to the entry of a $13 million forfeiture order.
Manhattan U.S. Attorney Preet Bharara stated: “With false promises of profitable investments in high-profile stock, John Mattera lured unsuspecting investors into a meticulously orchestrated, multi-million dollar fraud scheme, and used their money to fund his lavish lifestyle. With today’s guilty plea, we begin the process of holding him to account for his crimes.”
According to the charging instruments in this case and statements made in open court today at the plea proceeding:
In 2010 and 2011, MATTERA served as Chairman of the Advisory Board of Praetorian Global Fund Ltd. (“Praetorian”), a professional mutual fund, where he was responsible for the day-to-day management decisions. Beginning in the late summer of 2010, MATTERA and others offered investors the opportunity to invest in special purpose entities related to Praetorian (the “G Power Entities”). MATTERA falsely represented that the G Power Entities owned shares in companies such as Facebook and Groupon when they were still private. Ownership of stock in these private companies was particularly attractive to certain investors because, as MATTERA and others communicated, there was an expectation that initial public offerings would soon occur, thereby potentially increasing the value of the shares. In reality, neither MATTERA, Praetorian, nor the G Power Entities held these shares of stock.
Based on the misrepresentations of MATTERA and others, investors sent more than $11 million into “escrow accounts” maintained at a Florida bank. MATTERA reassured investors that their money would be held in the escrow accounts until either the offering was completed or another triggering event took place. Investors were told they would then receive their ownership interest in the particular special purpose entity. However, instead of maintaining the investor money in the escrow accounts as MATTERA promised, MATTERA caused the vast majority of the funds to be transferred to other entities with which he was associated. Ultimately, MATTERA misappropriated approximately $13 million of investor money, spending nearly $4 million on personal items for himself and his family, such as expensive jewelry, interior decorating, and luxury cars.
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MATTERA, 50, pled guilty to one count of securities fraud, one count of wire fraud, and one count of conspiracy to commit securities fraud and wire fraud. He faces a maximum sentence of 20 years in prison on each of the two substantive counts, and a maximum sentence of five years in prison on the conspiracy charge. The defendant also faces a fine of the greater of $5 million or twice the gross gain or gross loss from the offense on the securities fraud charge, as well as fines of lesser amounts on the remaining charges.
MATTERA will be sentenced before United States District Court Judge Richard J. Sullivan on February 1, 2013.
Mr. Bharara praised the work of the Criminal Investigators of the United States Attorney’s Office and the Internal Revenue Service, Criminal Investigation Division, which jointly investigated this. He also thanked the U.S. Securities and Exchange Commission.
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.
Assistant United States Attorneys Eugene Ingoglia and David Miller are in charge of the prosecution.