URGENT >> BULLETIN >> MOVING: Feds, SEC Say Connecticut Ponzi Scheme With International Reach Involved ‘Hundreds Of Millions Of Dollars’; 2 Arrests Made By FBI In Florida

BULLETIN: A Connecticut hedge-fund operator not registered with the SEC “in any capacity” and two other men — both Venezuelan nationals — have been charged in a spectacular Ponzi caper that allegedly involved hundreds of millions of dollars and a derailed plot to thwart an SEC investigation.

FBI agents have arrested Juan Carlos Guillen Zerpa, and Juan Carlos Horna Napolitano in Florida. They are charged with conspiracy to obstruct justice, to obstruct an official proceeding and to defraud the SEC.

Guillen Zerpa, 43, is an accountant and a citizen of Venezuela. Horna Napolitano is a Venezuelan citizen living in Pembroke Pines, Fla. Pembroke Pines is a city in Broward County.

The principal defendant in the case — Francisco Illarramendi, 42, of New Canaan, Conn. — already has pleaded guilty to criminal charges, according to U.S. Attorney David B. Fein of the District of Connecticut. He was accused by the SEC in its civil case of misappropriating at least $53 million in investor assets.

“As a result of the scheme, the investors and creditors of Illarramendi’s funds face potential losses of hundreds of millions of dollars,” the FBI said in a statement.

The SEC today upgraded civil charges filed against Illarramendi in January, saying he “attempted to hide the fact that his hedge funds were missing assets by providing the SEC staff with a false letter from an accountant in Venezuela that purported to verify the existence of approximately $275 million in assets held by one of the funds.

“Those assets do not exist,” the agency alleged.

“Illarramendi knew that the SEC was onto his scheme and compounded his fraud by attempting to mislead the Commission’s staff,” said David P. Bergers, director of the SEC’s regional office in Boston.

Fein said the scheme may prove to be the largest in Connecticut’s history.

“This investigation has revealed that Francisco Illarramendi operated a massive Ponzi scheme that has defrauded foreign investors of hundreds of millions of dollars,” Fein said. “While the precise dollar losses will not be known for some time, based on this fast-moving investigation, we believe this case represents the largest white-collar prosecution ever brought by this office.”

Both the FBI and the SEC pursued the case forcefully, Fein said. The agencies are part of the newly formed Connecticut Securities, Commodities and Investor Fraud Task Force, which Fein said was “actively investigating this and other financial fraud schemes.”

A veteran FBI agent said criminals domestic and “overseas” should expect to get caught.

“This investigation should serve as fair warning to those, whether in Connecticut, elsewhere in the United States, or overseas, who would attempt to victimize an increasing number of American and foreign investors,” said Kimberly K. Mertz, special agent in charge.

“The Connecticut Securities, Commodities, and Investor Fraud Task Force will continue to aggressively investigate these criminals and protect the rights of the investing public,” Mertz said.

Charging documents in the case allege a spectacular fraud that relied on self-dealing and an elaborate maze of deceit.

Illarramendi pleaded guilty to two counts of wire fraud, one count of securities fraud, one count of investment adviser fraud and one count of conspiracy to obstruct justice, to obstruct an official proceeding and to defraud the SEC.

He faces up to 70 years in federal prison.

“Illarramendi has admitted that he agreed to pay Guillen [Zerpa] and Horna [Napolitano] more than $3 million for fabricating” a letter and creating false support for $275 million in loans, the FBI said.

Read the statement from the FBI and Fein.

Read the SEC complaint.

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2 Responses to “URGENT >> BULLETIN >> MOVING: Feds, SEC Say Connecticut Ponzi Scheme With International Reach Involved ‘Hundreds Of Millions Of Dollars’; 2 Arrests Made By FBI In Florida”

  1. Juan Carlos Horna Napolitano is a popular chap, so many people want to talk to him.
    http://www.interpol.int/public/Data/Wanted/Notices/Data/2009/77/2009_43177.asp

      (Quote)

  2. Tony H: Juan Carlos Horna Napolitano is a popular chap, so many people want to talk to him.
    http://www.interpol.int/public/Data/Wanted/Notices/Data/2009/77/2009_43177.asp

    Nice find, Tony.

    Patrick

      (Quote)

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