Executive Of Venture Capital Funds Sentenced In Manhattan Federal Court To Over Four Years In Federal Prison For Securities And Wire Fraud
Audrey Strauss, the United States Attorney for the Southern District of New York, announced that MARC LAWRENCE was sentenced in Manhattan federal court to 55 months in prison for securities fraud and wire fraud in connection with his participation in a scheme to perpetrate a Ponzi-like investment scheme through a number of corporate entities (collectively referred to as “Downing”). LAWRENCE, the President of Downing entities, and his co-defendant DAVID WAGNER, the Chairman and CEO of Downing entities, solicited almost $10 million from approximately 40 Downing investors through materially false and misleading statements. LAWRENCE previously pled guilty to these charges, and was sentenced today before U.S. District Judge Alvin K. Hellerstein. WAGNER was previously sentenced by Judge Hellerstein to 72 months in prison.
Manhattan U.S. Attorney Audrey Strauss said: “ Marc Lawrence and his co-defendant fraudulently induced employee-investors to invest over $8 million in return for sales, operations, and management expertise in profitable business operations. Unfortunately for their investors, Downing generated virtually no returns, and was little more than a vehicle for Lawrence and Wagner to syphon employee-investor funds to pay Wagner’s personal expenses or pay off other investors in Ponzi-like fashion. Lawrence’s sentence of over four years in federal prison signifies the seriousness of his conduct and the consequence that assuredly awaits those who commit Ponzi-like frauds.”
According to the Indictment filed in Manhattan federal court:
From at least in or about December 2013 through at least in or about 2017, WAGNER, the Chief Executive Officer of Downing, and MARC LAWRENCE, the President of several Downing entities, solicited investments in Downing, a purported venture capital firm that would invest in healthcare start-ups referred to as “portfolio companies” and provide sales, operations, and management expertise to the portfolio companies in order to bring their products to market and generate returns for Downing investors, who also worked for Downing (the “employee-investors”). WAGNER and LAWRENCE, and others acting at their direction, solicited almost $10 million in investments in Downing from employee-investors located across the United States, including in the Southern District of New York, as a requirement of employment with Downing.
After making the required investment of between $150,000 and $250,000 in Downing and starting their employment at Downing, employee-investors soon learned, among other things, that contrary to representations made by WAGNER and LAWRENCE, and others acting at their direction, Downing did not have access to millions of dollars in funding, often could not make payroll, had virtually no products to sell, and that employee-investments were the overwhelming source of funding. Employee-investors also learned that WAGNER and LAWRENCE had misrepresented the companies in Downing’s portfolio, their product readiness, and ability to generate revenue. While the particular formulation of these misrepresentations shifted over time, WAGNER and LAWRENCE systematically sought and obtained employee-investor money through materially false and misleading statements.
Beginning in or about May 2016, after several employee-investors had brought lawsuits against WAGNER and LAWRENCE, and several Downing entities, alleging claims based on, among other things, fraud, WAGNER and LAWRENCE continued the scheme by recruiting employee-investors into a new company called Cliniflow Technologies, LLC (“Cliniflow”), through materially false and misleading statements about Cliniflow’s cash reserves, portfolio companies, and exposure to litigation. In fact, Cliniflow purportedly held majority ownership in the same primary portfolio company as other Downing entities and was simply a new name used by WAGNER and LAWRENCE to solicit investments from new employee-investors that was not tainted by the lawsuits filed against Downing entities. A majority of the over $1.5 million raised by WAGNER and LAWRENCE through Cliniflow was transferred to other Downing entities and used to pay for, among other things, WAGNER’s personal expenses and the repayment of prior investors.
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LAWRENCE, 54, of Clearwater, Florida, pled guilty to two counts of securities fraud and one count of wire fraud, which each carry a maximum sentence of 20 years in prison. In addition to the prison term, Judge Hellerstein ordered LAWRENCE to serve 3 years of supervised release, and to pay forfeiture in the amount of $150,000 and restitution in the amount of $4,450,000 to victims of his criminal conduct.
Ms. Strauss praised the work of the FBI, and thanked the United States Securities and Exchange Commission and the Enforcement Section of the Massachusetts Securities Division for their assistance.
This case is being handled by the Office’s Complex Frauds and Cybercrime Unit. Assistant U.S. Attorneys Jilan J. Kamal and Sagar K. Ravi are in charge of the prosecution.