Chief Executive Officer Of ACI Capital Group Charged With Wire Fraud
Defendant Arrested For Using Manhattan-Based Investment Advisory Firm To Steal Clients’ Money
BROOKLYN, NY – Fredrick Douglas Scott, 29, was arrested this morning on charges that he engaged in a wire fraud conspiracy to steal hundreds of thousands of dollars from investors. Scott was the Chief Executive Officer of ACI Capital Group LLC (ACI), an investment advisor registered with the Securities and Exchange Commission (SEC) since July 2011. To implement his scheme, Scott allegedly lied to potential investors to induce them to wire funds to one of ACI’s bank accounts, which Scott then stole. To date, investigators have identified at least $750,000 in investor losses caused by Scott. If convicted, Scott faces up to 20 years’ imprisonment on the fraud charge, as well as a fine equal to double the investors’ losses and mandatory restitution to the victims.
The charges were 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 (FBI).
According to the complaint unsealed this afternoon, 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, pursuant 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 two related fraudulent schemes, causing hundreds of thousands of dollars in losses.
As detailed in the complaint, in connection with the first scheme, Scott worked with intermediaries or finders to locate potential victims. Once a potential victim was identified, Scott promised victims a high rate of return for providing short-term financing to businesses purportedly associated with ACI. In connection with the second scheme, Scott enticed his victims to make up-front deposits with ACI as collateral for favorable loans to the victims. In both schemes, once victims wired money to ACI, Scott stole the funds for his personal use. Bank records show that Scott used client funds to purchase personal items at 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 to his personal checking account.
“Fredrick Douglas Scott wanted a place in history, but tried to secure that spot with stolen money rather than honest work. As alleged, instead of delivering real value to his clients, he devoted his energy to schemes to steal their money, using their investments as his own personal piggy bank. Effective law enforcement action shut down his schemes, and the defendant will now face justice. We are committed to protecting the public from the effects of fraud,” stated United States Attorney Lynch. “I would like to thank our partners at the FBI for their swift action and effective work on this important investigation.”
FBI Assistant Director-in-Charge Venizelos stated, “As alleged, the defendant was more creative in touting his own abilities as an investment strategist than he was at actually investing clients’ money. In actuality, he was a con man who induced victims to part with their money by promising high returns, and then squandered their money on himself.”
The defendant is scheduled to be arraigned this afternoon before United States Magistrate Judge Steven M. Gold at the federal courthouse in Brooklyn. The charges in the complaint are merely allegations, and the defendant is presumed innocent unless and until proven guilty.
This case was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force. President Obama established the interagency 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.
The government’s case is being prosecuted by Assistant United States Attorney James P. Loonam.
FREDRICK DOUGLAS SCOTT