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

FOR IMMEDIATE RELEASE
Tuesday, November 7, 2017

Chairman Of Purported Hedge Fund Sentenced For Conspiring To Commit Securities And Wire Fraud

Joon H. Kim, the Acting United States Attorney for the Southern District of New York, announced that NICHOLAS MITSAKOS was sentenced today to 30 months in prison on charges of conspiring to commit securities fraud and wire fraud in connection with his operation of a purported hedge fund called Matrix Capital.  MITSAKOS pled guilty on May 25, 2017, and was sentenced by the Honorable Denny Chin, a judge on the United States Court of Appeals for the Second Circuit who was sitting by designation in the Southern District of New York.

Acting Manhattan U.S. Attorney Joon H. Kim said:  “As he previously admitted in pleading guilty, Nicholas Mitsakos spun a fake tale to investors about his miraculous track record of trading in the securities markets.  Mitsakos lured investors by claiming returns of over 66 percent for one year, never disclosing that his portfolio was an entirely ‘hypothetical’ one and that in fact, he had never entered into any real trades.”

According to the Complaint, Indictment, and statements made during court proceedings:

In or about October 2013, MITSAKOS created a purported hedge fund called Matrix Capital (“Matrix”), which claimed to be a long-short fund with a long track record of success.  In order to raise money for his fund, MITSAKOS sent marketing materials to numerous potential investors claiming that Matrix had achieved outsized returns that exceeded major indices like the S&P 500.  One newsletter sent to potential investors, for example, claimed that Matrix had achieved returns of approximately 25% in 2012, 66% in 2013, 20% in 2014, and 49% between January and October of 2015.  MITSAKOS also led potential investors to believe that these returns were based on actual securities trades by Matrix, and that Matrix had tens of millions in assets under management (“AUM”). 

MITSAKOS’s representations regarding Matrix’s performance and AUM were false.  In fact, Matrix had no track record in actually purchasing and selling securities, and, indeed, had no meaningful assets at all until receiving funds from a victim in September 2015.  Instead, the purported performance results provided to potential investors were premised on how a hypothetical portfolio would have performed had Matrix actually acquired certain securities.  No such trading actually took place and Matrix never actually owned any of the securities in the hypothetical portfolio that MITSAKOS maintained.  Even in regard to Matrix’s hypothetical investment portfolio, MITSAKOS retroactively manipulated the investments in that portfolio from time to time in order to improve dramatically its hypothetical performance. 

Based in part on these and other misrepresentations, Matrix received approximately $2 million from an investor in September 2015.  However, MITSAKOS used only a portion of that amount – about $1.2 million – to actually buy and sell securities.  Of the remaining amount, MITSAKOS spent hundreds of thousands of dollars on business expenses and personal expenses like car payments, credit cards, and his own rent.  MITSAKOS’s trading of the $1.2 million that he did invest, moreover, resulted in significant losses.

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In addition to the prison sentence, MITSAKOS, 57, was sentenced to two years of supervised release.  The Court further ordered MITSAKOS to forfeit a sum of $861,163.62 and to pay restitution to victims of his offense.           

Mr. Kim praised the exceptional work of the Office’s criminal investigators, and thanked the Securities and Exchange Commission for its assistance. 

This case is being handled by the Office’s Securities and Commodities Fraud Task Force.  Assistant United States Attorneys Robert Allen and Brendan Quigley are in charge of the prosecution.  

Topic(s): 
Securities, Commodities, & Investment Fraud
Press Release Number: 
17-359
Updated November 7, 2017