Connecticut Man Sentenced For Multimillion-Dollar Fraud Scheme
Steven Simmons Defrauded Investors and Diverted Fraudulent Proceeds for His Own Benefit
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that STEVEN SIMMONS was sentenced today in Manhattan federal court to 37 months in prison by U.S. District Judge Kimba M. Wood. Between 2013 and January 2017, SIMMONS solicited over $6 million in investments for a hedge fund (the “Hedge Fund”). SIMMONS, however, misappropriated nearly $2 million of these funds for his own use and that of a co-conspirator. As SIMMONS well knew, other investor funds solicited by SIMMONS were used by the owner of the Hedge Fund in a Ponzi-like scheme to make payments to prior Hedge Fund investors. SIMMONS pled guilty before U.S. Magistrate Judge Barbara C. Moses on October 30, 2017.
Manhattan U.S. Attorney Geoffrey S. Berman said: “Steven Simmons lied to investors about how their money would be used and what returns they could expect. He used investor funds for his own personal use – including the purchase of a house – and provided other investor funds for use in paying back earlier investors. Now Simmons has been sentenced to more than three years in prison for his crimes.”
According to allegations in the superseding Indictment filed in Manhattan federal court, previous court filings, and statements made in public court proceedings:
Between 2013 and January 2017, SIMMONS solicited investments by falsely representing to investors that their funds would be used by the Hedge Fund for legitimate, specified investment purposes, that they would receive specific rates of return, and that their investments would not be placed at risk or commingled with other funds. In fact, SIMMONS diverted a substantial portion of investor funds for his own use and the use of a co-conspirator, while the remaining funds were used by the Hedge Fund to repay earlier investors who were demanding the return of their money.
Among other false and misleading statements, SIMMONS told one investor, a single mother of three children whose source of funds was an alimony payment received in a recent divorce (“Victim-1”), that her capital would be invested with the Hedge Fund in securities, her principal investment would be preserved and not commingled with other investor funds, and that she would receive a return of at least 15% on the investment. Contrary to these representations, SIMMONS stole much of Victim-1’s investment, using $700,000 of that money within two months of Victim-1’s investment to buy a house in Wilton, Connecticut, and wiring $700,000 to the personal account of a co-conspirator.
SIMMONS told another investor, a family investment office (“Victim Entity-2”), that its funds would be placed by the Hedge Fund with a highly successful group of portfolio managers and provided performance information for these portfolio managers. In truth and in fact, SIMMONS solicited those investment funds from Victim Entity-2 for the purpose of repaying an earlier investor in the Hedge Fund who had demanded the return of its investment. Much of Victim Entity-2’s funds were, within minutes of their receipt by the Hedge Fund, wired to the earlier investor. The following day, $50,000 was wired by the Hedge Fund to an account controlled by SIMMONS. As part of the fraudulent scheme, Simmons also created and provided investors with false monthly statements.
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In addition to his prison sentence, SIMMONS, 49, of Wilton, Connecticut, was sentenced to three years of supervised release, ordered to forfeit $6,900,000, representing the amount of proceeds obtained as a result of the conspiracy, including the forfeiture of property SIMMONS bought in Wilton, Connecticut with proceeds of the fraud, and ordered to pay restitution to the victims of the offense.
Mr. Berman praised the investigative work of the Federal Bureau of Investigation, and thanked the Securities and Exchange Commission for its assistance in the investigation.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Elisha J. Kobre and Brendan F. Quigley are in charge of the prosecution.