Senior Executive Of Venture Capital Funds Pleads Guilty In Manhattan Federal Court To Securities And Wire Fraud
Audrey Strauss, the Acting United States Attorney for the Southern District of New York, announced today that MARC LAWRENCE pled guilty to securities fraud and wire fraud in connection with his role as a senior executive of a number of corporate entities (collectively referred to as “Downing”) that were operated as a Ponzi-like scheme. LAWRENCE solicited millions of dollars from Downing investors through materially false and misleading statements regarding, among other things, Downing’s use of investor proceeds, sources of funding, financial condition and ability to pay salaries to employee-investors, and portfolio companies. LAWRENCE pled guilty before U.S. District Judge Alvin K. Hellerstein. LAWRENCE’s co-defendant, David Wagner, the chief executive officer of Downing, previously pled guilty to securities fraud and wire fraud before Judge Hellerstein on September 21, 2020.
Acting Manhattan U.S. Attorney Audrey Strauss said: “As he admitted in court, Marc Lawrence and his co-defendant swindled employee-investors of their purported venture capital firm. They fraudulently induced employee-investors to hand over more than $8 million that was supposed to be invested in profitable business operations. The firm was a sham, and employee-investor funds were used to pay personal expenses or pay off other investors in Ponzi-like fashion. Now Lawrence awaits sentencing for his crimes.”
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 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 more than approximately $8 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 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, 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, 66, of St. Petersburg, Florida, pled guilty to two counts of securities fraud and one count of wire fraud, each of which carries a maximum sentence of 20 years in prison. The maximum potential sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge. As part of the plea agreement with the Government, LAWRENCE agreed to forfeit $150,000 in United States currency and pay restitution of $4,550,000 to victims of his criminal conduct.
LAWRENCE will be sentenced by Judge Hellerstein on February 1, 2021, at 2:30 p.m.
Ms. Strauss praised the outstanding work of the Federal Bureau of Investigation, and thanked the U.S. Securities and Exchange Commission and the Enforcement Section of the Massachusetts Securities Division for their assistance in the investigation.
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.