Wallingford Man Charged with Operating Ponzi Scheme
Deirdre M. Daly, United States Attorney for the District of Connecticut, today announced that a federal grand jury in New Haven returned an 18-count indictment yesterday charging JOSEPH A. CASTELLANO, 58, of Wallingford, with fraud and money laundering offenses stemming from an investment scheme that defrauded individuals of more than $1.5 million.
As alleged in the indictment, CASTELLANO operated various entities out of offices in Wallingford, including Casbo Investments, Wallingford Investors Limited Partnership, AIM Realty Investors, and Castellano & Co., LLC. As a Certified Public Accountant and owner of Castellano & Co., LLC, CASTELLANO prepared federal and state tax returns for individuals and local businesses. In connection with his tax preparation business, CASTELLANO established a base of clients to which he offered financial services and investment opportunities in addition to preparing their taxes.
The indictment alleges that, beginning in approximately July 2007, CASTELLANO falsely represented to victim-investors that he had clients who were in need of capital to fund businesses or real estate development projects, but were unable to secure funding from traditional sources such as financial institutions. CASTELLANO told victim-investors that he would obtain for them a consistent rate of return of between approximately six percent and eight percent annually on their money by taking their money and placing it with, or loaning it to, one or more of his other clients. CASTELLANO, through Casbo Investments, prepared and executed official-looking documents and investment contracts termed “Demand Notes,” which contained a promise to return the principal amount, with interest, at any time.
In fact, there were no actual investments or investment opportunities, and the money was not invested with or loaned to other clients of CASTELLANO. CASTELLANO diverted the funds for his own use and benefit, including making payments to other victim-investors that were falsely represented to be “interest” payments. CASTELLANO also made false statements to certain victim-investors to explain various delays in the purported interest payments.
Through this scheme, it is alleged that CASTELLANO defrauded more than 10 victim-investors of more than $1.5 million.
CASTELLANO was arrested yesterday and detained. He appeared today before U.S. Magistrate Judge Sarah A. L. Merriam in New Haven and was released on a $250,000 bond.
The indictment charges CASTELLANO with 10 counts of wire fraud, one count of mail fraud and four counts of securities fraud, offenses that carry a maximum term of imprisonment of 20 years on each count. The indictment also charges CASTELLANO with three counts of money laundering, an offense that carries a maximum term of imprisonment of 10 years on each count.
U.S. Attorney Daly stressed that an indictment is not evidence of guilt. Charges are only allegations, and a defendant is presumed innocent unless and until proven guilty beyond a reasonable doubt.
This matter is being investigated by the Federal Bureau of Investigation, Internal Revenue Service – Criminal Investigation Division, and U.S. Postal Inspection Service. The case is being prosecuted by Assistant U.S. Attorneys Michael McGarry and John Pierpont.