Los Angeles Man Charged with Running $350 Million Ponzi Scheme
Defendant Also Allegedly Embezzled Over $26 Million from Marin-based Property Investment Company
SAN FRANCISCO – A criminal information was filed today in federal court alleging that Lewis Wallach, the former CEO of a Marin-based company known as Professional Financial Investors, or PFI, ran the company for years as a Ponzi scheme, announced United States Attorney David L. Anderson and Federal Bureau Investigation Assistant Special Agent in Charge Sid Patel. Wallach is charged in the information with one count of wire fraud and one count of conspiracy to commit wire fraud. Additional facts regarding the investigation and charges can be found here: https://youtu.be/M30PEgy0txo
“We allege that PFI became a classic Ponzi scheme,” said U.S. Attorney Anderson. “Money taken from new investors was allegedly used to pay existing investors while losses mounted behind the scenes. This alleged Ponzi scheme came crashing down just four months ago after the death of PFI’s founder in May 2020. We allege that for years Wallach conspired with PFI’s founder to fool investors.”
“The FBI has been working to identify victims in this Ponzi scheme,” said FBI ASAC Patel. “We may not be able to make the victims whole, but we are determined to do everything we can under the federal legal process to right these wrongs. We know this is a particularly difficult time of financial insecurity for so many Americans, and that fraudulent investments can be devastating to families and businesses.”
According to the information, PFI was a real-estate firm that owned approximately 70 properties throughout Marin and Sonoma Counties. Wallach managed PFI along with the founder of the firm, who has since deceased, the information alleges, and PFI raised more than $350 million from investors since 2015. The information alleges that from at least 2015, Wallach and the founder knew that the revenues generated by PFI properties could not meet PFI’s obligations to pay interest and distributions, but that they hid the truth from investors. To the contrary, according to the information, Wallach and the founder continued to falsely reassure investors, even during the COVID-19 pandemic, that PFI had the financial reserves to survive.
The information also alleges that from 2015 to May 2020, Wallach diverted more than $26 million from PFI for his personal benefit, including personal investments in a land development project in Texas, an office space development project in California, and oil and gas exploration and development projects, as well as payment of his personal credit cards.
An information merely alleges that crimes have been committed, and Wallach is presumed innocent until proven guilty beyond a reasonable doubt. If convicted of wire fraud or conspiracy to commit wire fraud under 18 U.S.C. §§ 1343 or 1349, Wallach faces a maximum sentence of 20 years’ imprisonment on each count, a fine of $250,000, and restitution if appropriate. However, any sentence following conviction would be imposed by the court after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.
The case is being prosecuted by the Corporate Fraud Strike Force of the U.S. Attorney’s Office. The prosecution is the result of an investigation by the Federal Bureau of Investigation. The United States Attorney’s Office and the Federal Bureau of Investigation also thank the San Francisco Regional Office of the Securities and Exchange Commission, which conducted a parallel investigation that was also announced today.