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Tuesday, January 27, 2009

Lucky Week: Two More Madoff Copycats Arrested

Feds: NYer ran $370m Ponzi scheme
The Albany Times Union by FRANK ELTMAN - January 27, 2009

CENTRAL ISLIP, N.Y. -- The owner of a New York investment firm ran a $370 million Ponzi scheme, luring in clients with promises of astronomical returns while secretly blowing tens of millions of dollars on bad trades and conspicuous spending, federal authorities said Tuesday.
Nicholas Cosmo, who was arrested Monday by FBI and U.S. Postal Inspection Service agents, did not speak or enter a plea Tuesday to mail fraud charges during a brief court appearance on Long Island. Magistrate Judge Thomas Boyle ordered him held until a bail hearing on Thursday. Prosecutors had argued Cosmo was a flight risk, claiming he had not lived at home for the past several days. They also conceded that although some of the money had been accounted for, vast sums were still missing. The missing money is "a big issue," the judge said. "I'm very concerned."

Defense attorney Steven Feldman told the judge his client had left home merely to avoid the wrath of irate investors. "Things have gotten heated in Mr. Cosmo's life," the lawyer said. A criminal complaint says Cosmo, who runs Agape World Inc. and Agape Merchant Advance in Hauppauge and Queens, took in more than $370 million from about 1,500 investors since 2006. The investors believed they would make returns as high as 80 percent a year from interest collected on short-term loans to businesses. But the complaint said an investigation revealed that "much of the money paid back to investors ... was actually money provided by subsequent investors" -- a Ponzi scheme similar to the one alleged in the Bernard Madoff case. In cheating investors, Cosmo, 37, "not only understated the risk, he completely misrepresented the underlying investments," Joseph Demarest, head of the FBI's New York office, said in a statement. "When you lie about what you're selling people, that's fraud."

Investigators say less than $10 million in loans were made. Aside from compensating prior investors, the remainder was used to pay $55 million to brokers who recruited new investors. Since 2003, the firm also had transferred $100 million into commodities futures trading accounts controlled by Cosmo. About $80 million of that was lost on trades, the complaint said. Cosmo also spent investor money on jewelry, hotel rooms, limousines, payments to his wife and a private baseball league. About $212,000 was used to pay restitution from a previous mail fraud conviction. As of last Thursday, Cosmo's firm had only $746,000 in the bank, prosecutors said. "I was suckered just like the next guy," said Ray Diserio, one of a handful of investors who attended Cosmo's court appearance. "I guess the bottom line is that if it's too good to be true, don't do it. You're better off putting your money in the bank." If convicted, Cosmo faces up to 20 years in prison. Associated Press Writer Tom Hays in New York City contributed to this report.

Feds Arrest Another Missing Money Manager
NBC - January 27, 2009

Who's next? Another missing money manager suspected of fraud has turned himself in to authorities.

Bernard Madoff pulled off what's being called "the biggest financial scandal, probably, in the history of the markets," taking investors -- including some... Arthur Nadel, a Florida hedge fund manager who disappeared this month just as he was due to pay investors $50 million surrendered in Tampa Tuesday to face federal securities and wire fraud charges, the FBI said. Nadel was due in federal court later Tuesday afternoon. The FBI did not provide additional details about his surrender or where he has been for the past two weeks. Nadel's attorney, Todd A. Foster, did not immediately respond to a telephone message left with his office.

Federal regulators last week sued Nadel for fraud, saying he misled investors and overstated the value of investments in six funds by about $300 million. The Securities and Exchange Commission also won a court order freezing his assets. A criminal complaint unsealed Tuesday in federal court in Manhattan alleges Nadel has been defrauding investors since 2004. Nadel, 76, disappeared Jan. 14 after telling his wife in a note that he felt guilty. He also threatened to kill himself, according to the Sarasota County Sheriff's Office. Police found his green Subaru the next day in an airport parking lot. In a lawsuit filed in federal court in Tampa, the SEC said Nadel recently transferred at least $1.25 million from two funds to secret bank accounts that he controlled.

Two investment companies co-owned by Nadel, Scoop Capital and Scoop Management, agreed last week in a settlement with the SEC to injunctions and an asset freeze. They neither admitted nor denied wrongdoing. According to Scoop Management's internal accountant, the six funds have between 500 and 600 investors nationwide. Earlier this month, many were told that the funds were empty. Sarasota investigators have been fielding inquiries from investors from around the country and as far away as France.  The SEC said Nadel's funds appeared to have assets totaling less than $1 million, while he claimed in sales materials for three of the funds that they had about $342 million in assets as of Nov. 30. The materials also boasted of monthly returns of 11 to 12 percent for several of the funds last year, when they actually had negative results.

The investigation came on the heels of two other high-profile financial fraud cases. Investigators say Wall Street's Bernard Madoff cost investors some $50 billion late last year in what may be the largest Ponzi scheme in history. And Indiana money manager Marcus Schrenker was apprehended in Florida earlier this month after allegedly trying to stage his death in a plane crash as investigators probed his businesses. On Monday, the owner of New York investment firm Agape World, Nicholas Cosmo, surrendered to FBI in Long Island. He’s accused of cheating investors of about $140 million.


Anonymous said...


Anonymous said...

Here's some good banking news, for a change:

U.N. crime chief says drug money flowed into banks

Reuters - Sunday, January 25, 2009
VIENNA: The United Nations' crime and drug watchdog has indications that money made in illicit drug trade has been used to keep banks afloat in the global financial crisis, its head was quoted as saying on Sunday.

Vienna-based UNODC Executive Director Antonio Maria Costa said in an interview released by Austrian weekly Profil that drug money often became the only available capital when the crisis spiralled out of control last year. "In many instances, drug money is currently the only liquid investment capital," Costa was quoted as saying by Profil. "In the second half of 2008, liquidity was the banking system's main problem and hence liquid capital became an important factor."

The United Nations Office on Drugs and Crime had found evidence that "interbank loans were funded by money that originated from drug trade and other illegal activities," Costa was quoted as saying. There were "signs that some banks were rescued in that way." Profil said Costa declined to identify countries or banks which may have received drug money and gave no indication how much cash might be involved. He only said Austria was not on top of his list, Profil said.

Anonymous said...

What these guys make is chump change to what they would get if they had become an attorney and then could have lawfully ripped those people off.

Anonymous said...

Trust is believed to be a virtue by many people. They trust our NY court system. They trust the judges. They trust the media would report corruption. They trust Madoff because he is a Jew. Did you trust Paterson to pick an honest judge? Did you trust Cuomo to root out corruption? Do you beleive Lippman will become ethical as Chief Judge?

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