Long Island Investment Fund Manager Sentenced To Six Years In Prison For Operating A $17 Million Ponzi Scheme
Defendant Defrauded 74 Investors for Nearly Ten Years
Earlier today at the federal courthouse in Central Islip, New York, James Peister was sentenced to six years in prison and three years of supervised release, following his November 10, 2014 guilty plea to committing securities fraud for defrauding 74 investors of $17.9 million by operating a Ponzi scheme. As part of the sentence, Peister was ordered to pay $9,657,218.65 in restitution to the victims of his fraud and $17.9 million in forfeiture, which includes his residence in St. James, New York, and his Hummer sports utility vehicle.
The sentence was announced by Kelly T. Currie, Acting United States Attorney for the Eastern District of New York, and Diego Rodriguez, Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office (FBI).
“For nearly a decade, Peister lulled his victims into a false sense of security through empty promises of reliable growth and conservative investing. After stealing millions of dollars in inheritances and retirement savings, Peister now faces his own retirement in prison while his victims struggle to rebuild their lives,” stated Acting United States Attorney Currie. “Would-be fraudsters take note that you, like Peister, who prey on the investing public will be held accountable.” Mr. Currie thanked the U.S. Securities and Exchange Commission (SEC) and the U.S. Commodity Futures Trading Commission (CFTC) for their cooperation and assistance.
FBI Assistant Director-in-Charge Rodriguez stated, “Today's sentencing marks a closing for Peister's $17 million Ponzi scheme, although for his victims, who lost their inheritance and retirement savings, there is no closure that can make them whole again. The FBI is committed to investigating and bringing to justice those who prey upon trusting individuals for their own personal gain.”
Between January 2000 and June 2009, Peister raised more than $17 million from at least 74 investors in connection with an investment fund that he managed. He had assured those investors that their money would be invested safely in a variety of securities, including stocks, futures, and fixed income instruments. Instead of investing the money as he had promised, Peister misappropriated the money to run a Ponzi scheme. Among other things, he used the investors’ money to pay millions of dollars in redemptions to his victim investors to keep the scheme afloat and to purchase luxury items such as an expensive estate in St. James and a Hummer luxury vehicle. To avoid detection and continue the scheme, Peister sent phony account statements to investors that falsely showed that their funds were invested and performing well and submitted bogus financial statements to the investment fund’s independent auditor. As a result, investors believed that the funds were performing satisfactorily, and they continued to invest their money with Peister. Peister’s Ponzi scheme collapsed in the wake of the financial crisis in 2008, when he could no longer keep up with demands for redemptions from nervous investors.
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’s 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. Since fiscal year 2009, the Justice Department has filed over 18,000 financial fraud cases against more than 25,000 defendants. For more information on the task force, visit http://www.StopFraud.gov.
The government’s case is being prosecuted by the Office’s Business and Securities Fraud Section. Assistant United States Attorneys Jacquelyn M. Kasulis and Jonathan P. Lax are in charge of the prosecution, with assistance provided by Assistant United States Attorney Brian D. Morris of the Office’s Civil Division, which is responsible for the forfeiture of assets.
JAMES M. PEISTER
St. James, New York
E.D.N.Y. Docket No. 14-CR-328 (JFB)