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Justice News

Department of Justice
U.S. Attorney’s Office
District of New Jersey

Wednesday, June 5, 2013

Monmouth County, New Jersey Financial Adviser Sentenced To Seven Years In Prison For $9 Million Ponzi Scheme

TRENTON, N.J. – Maxwell B. Smith, a Monmouth County, N.J.-based financial adviser and broker, was sentenced today to 84 months in prison for defrauding New Jersey investors out of more than $9 million, U.S. Attorney Paul J. Fishman announced.

Smith, 73, of, Red Bank, N.J., previously pleaded guilty to a five-count Information charging him with mail fraud in connection with his creation of a sham entity known as Health Care Financial Partners (HCFP). Smith entered his guilty plea before U.S. District Judge Mary L. Cooper, who imposed the sentence today in Trenton federal court. 

According to documents filed in this case and statements made in court:

HCFP purported to be an investment fund with more than $300 million in assets under management, comprising loans to healthcare facilities such as nursing homes. Using his relationships with his investor clients, Smith sold supposed securities in HCFP through sham bond offerings ranging in price from $25,000 to $300,000 per investment.

Smith induced individual investors by creating an investment prospectus falsely stating that the total value of HCFP’s holdings exceeded $300 million. He also falsely claimed that investors’ money would earn yearly dividend interest of between 7.5 and 9 percent, and that the returns on their investments would be tax-free, similar to municipal bonds.

To lull investors into thinking their investments were legitimate and earning returns, Smith used a portion of investors’ funds to purchase bank checks, which he then sent to investors as purported earnings on their investments.           

At his plea hearing, Smith admitted he did not invest the money as promised, but rather misappropriated the investors’ money for his personal expenses including dining, entertainment, gambling and international travel. Smith admitted defrauding HCFP investors out of more than $9 million.

In addition to the prison term, Judge Cooper sentenced Smith to three years of supervised release. Restitution will be determined at a future hearing.

U.S. Attorney Fishman credited postal inspectors of the U.S. Postal Inspection Service, under the direction of Inspector in Charge Maria L. Kelokates; as well as special agents of the FBI, under the direction of Special Agent in Charge Aaron T. Ford, with the investigation.

The government is represented by Assistant U.S. Attorney Gurbir S. Grewal of the U.S. Attorney’s Office Economic Crimes Unit in Newark.


Defense counsel: Robert A. Weir, Jr., Esq., Red Bank, N.J.

Updated March 18, 2015